UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:
Not applicable
For the transition period from ____ to _____
Commission file number 001-35948
Kamada Ltd.
(Exact name of registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
State of Israel
(Jurisdiction of incorporation or organization)
2 Holzman St.
Science Park
P.O Box 4081
Rehovot 7670402
Israel
(Address of principal executive offices)
Amir London, Chief Executive Officer
2 Holzman St., Science Park
Rehovot 7670402, Israel
+972 8 9406472
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant
to Section 12(b) of the Act.
Title of Each Class
Trading Symbol
Name of Each Exchange on which Registered
Ordinary Shares, par value NIS 1.00 each
KMDA
The Nasdaq Stock Market LLC
Securities registered or to be registered pursuant to Section 12(g)
of the Act. None
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act. None
Indicate the number of outstanding shares of each
of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report.
As of December 31, 2024, the Registrant had
57,505,031 Ordinary Shares outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act
of 1934.
☐ Yes ☒ No
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements
for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of “large
accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Emerging growth company
☐
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected
not to use the extended transition
period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the
Exchange Act. ☐
† The term “new or revised financial
accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification
after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment
of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or
issued its audit report. ☒
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued by the International
Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
TABLE OF CONTENTS
PART I
Item
1.
Identity of Directors, Senior Management and Advisers
1
Item
2.
Offer Statistics and Expected Timetable
1
Item
3.
Key Information
1
Item
4.
Information on the Company
42
Item
4A.
Unresolved Staff Comments
73
Item
5.
Operating and Financial Review and Prospects
73
Item
6.
Directors, Senior Management and Employees
88
Item
7.
Major Shareholders and Related Party Transactions
106
Item
8.
Financial Information
108
Item
9.
The Offer and Listing
109
Item
10.
Additional Information
109
Item
11.
Quantitative and Qualitative Disclosures About Market Risk
118
Item
12.
Description of Securities Other Than Equity Securities
119
PART II
Item
13.
Defaults, Dividend Arrearages and Delinquencies
120
Item
14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
120
Item
15.
Controls and Procedures
120
Item
16.
[Reserved]
121
Item
16A.
Audit Committee Financial Expert
121
Item
16B.
Code of Ethics
121
Item
16C.
Principal Accountant Fees and Services
121
Item
16D.
Exemptions from the Listing Standards for Audit Committees
121
Item
16E.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
121
Item
16F.
Change in Registrant’s Certifying Accountant
121
Item
16G.
Corporate Governance
122
Item
16H.
Mine Safety Disclosure
122
Item
16I.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
122
Item
16J.
Insider trading policies
122
Item
16K.
Cybersecurity
123
PART III
Item
17.
Financial Statements
125
Item
18.
Financial Statements
125
Item
19.
Exhibits
126
i
In this Annual Report on
Form 20-F (this “Annual Report”), unless the context indicates otherwise, references to “NIS” are to the legal
currency
of Israel, “U.S. dollars,” “$” or “dollars” are to United States dollars, and the terms “we”,
“us”, the “Company”, “our company”, “our”, and
“Kamada” refer to Kamada Ltd.,
along with its consolidated subsidiaries.
This Annual Report contains
forward-looking statements that relate to future events or our future financial performance, which express the current
beliefs and expectations
of our management in light of the information currently available to it. Such statements involve a number of known and unknown
risks,
uncertainties and other factors that could cause our actual future results, performance or achievements to differ materially from any
future results,
performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include
all statements that are not
historical facts and can be identified by words such as, but without limitation, “believe”, “expect”,
“anticipate”, “estimate”, “intend”, “plan”, “target”,
“likely”,
“may”, “will”, “would”, or “could”, or other words, expressions or phrases of similar
substance or the negative thereof. We have based these
forward-looking statements largely on our management’s current expectations
and future events and financial trends that we believe may affect our
financial condition, results of operation, business strategy and
financial needs. Forward-looking statements include, but are not limited to, statements
about:
●
our strategy is focused on driving profitable growth through four growth pillars: (i) continued investment in the commercialization and life
cycle management of our commercial proprietary products (which comprise six FDA-approved specialty plasma-derived products:
KEDRAB®, CYTOGAM®, GLASSIA®, WINRHO SDF®, VARIZIG® and HEPAGAM B®, as well as KAMRAB®, KAMRHO (D)® and two
types of equine-based anti-snake venom products) (the “Proprietary Products”), led by KEDRAB and CYTOGAM sales in the U.S. market, as
well as the products in our Distribution segment portfolio, mainly through the launch of several biosimilar products in Israel; (ii) our goal to
secure significant new business development, in-licensing, collaboration, and/or merger and acquisition opportunities in 2025, and our belief
that such opportunities will enhance our marketed products portfolio and leverage our financial strength and existing commercial
infrastructure to drive long-term growth; (iii) expanding our plasma collection operations to support revenue growth through sales of normal
source plasma and in support of our growing demand for hyper-immune specialty; and (iv) advance the development and commercialization
of additional product candidates, targeting areas of significant unmet medical need, with our lead product candidate Inhaled AAT, for which
we are continuing to progress the InnovAATe clinical trial, a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial;
●
our current expectation to generate total revenues for the fiscal year 2025 in the range of $178 million to $182 million and adjusted EBITDA
in the range of $38 million to $42 million. The midpoint of the projected 2025 revenue and adjusted EBITDA forecast represents a year-over-
year increase of 12% in revenues and 17% in adjusted EBITDA (for details regarding the use of non-IFRS measures, see “Item 5. Operating
and Financial Review and Prospectus—Non-IFRS Financial Measures”);
●
our plan to pay a special cash dividend on April 7, 2025, based on our announcement on March 5, 2025, of a special cash dividend of $0.20
per share (approximately $11.5 million in the aggregate), with a record date (ex-dividend date) of March 17, 2025;
●
our belief that a significant portion of our revenues has been, and will continue to be, derived from sales of our Proprietary Products and that
KEDRAB and CYTOGAM will continue to be our two leading products in our existing Proprietary Products portfolio for the foreseeable
future;
●
our expectation that based on current GLASSIA sales by Takeda and forecasted future growth, we will receive royalties from Takeda in the
range of $10 million to $20 million per year for 2025 to 2040;
●
our expectation to continue manufacturing HEPAGAM B, VARIZIG and WINRHO SDF at Emergent BioSolutions Inc. (“Emergent”) in the
foreseeable future, and our plan to transition the manufacturing of these products to our manufacturing facility in Beit Kama, Israel, subject
to executing a new amended manufacturing services agreement with Emergent covering operational aspects and technology transfer related
services and scope, and our anticipation that if initiated, such a technology transfer may be completed within four to five years following
initiation thereof;
●
our intention to expand our Proprietary Products business, including that of CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF, by
leveraging our existing strong international distribution network to grow our commercial revenue in the existing markets in which we sell our
products, as well as to expand to geographic markets in which these products are not currently sold;
●
our expectation that, subject to European Medicines Agency (“EMA”) and subsequently the Israeli Ministry of Health (“IMOH”) approvals,
we will launch in Israel two biosimilar products in 2025 and the remaining biosimilar products are expected to be launched in Israel over the
coming years, at a rate of 1-3 products per year, while continuing to explore opportunities to in-license additional biosimilar products and
expand the portfolio and that sales generated by the launch of the biosimilar products portfolio will serve as a major growth catalyst, and our
estimate that revenues from sales of our existing biosimilar products portfolio in Israel will increase to between approximately $15 million to
$20 million within the next five years and will continue to grow thereafter, subject to the continued launch of the entire portfolio as scheduled;
●
our ability to procure adequate quantities of plasma and fraction IV from our suppliers, which are acceptable for use in our manufacturing
processes;
ii
●
our intention to expand our plasma collection operations; our expectation that our plasma collection center in Houston, Texas will become
one of the largest hyper-immune plasma collection sites in the United States and will also collect normal source plasma for sale to third
parties, and to commence operations at our third plasma collection center in San Antonio, Texas by the end of the first quarter of 2025,
following the completion of its construction and obtaining the required regulatory approvals; and our expectation that the expansion of our
plasma collection capabilities will allow us to better support our hyper-immune plasma needs, potentially lower our raw material costs, as
well as generate additional revenues through sales of collected normal source plasma to other plasma-derived manufacturers;
●
our expectation that each of the Houston and San-Antonio plasma collection centers, once fully operational, will contribute annual revenues
of $8 million to $10 million in sales of normal source plasma;
●
our intention to apply for EMA approval of both the Houston and San Antonio plasma collection centers to enable future sales of normal
source plasma to potential European customers;
●
our intention to seek new long-term supply agreements for hyper-immune plasma with additional plasma-collection companies;
●
our expectations regarding the potential market opportunities for our products and product candidates;
●
our expectation that Kedrion Biopharma Inc. (“Kedrion”)
will purchase from us annual minimum quantities of KEDRAB during fiscal years
2025 through 2027 pursuant to the fifth amendment to the
supply and distribution agreement between the parties, through which, Kedrion
committed to purchase minimum quantities of KEDRAB with
an aggregate revenues to us of approximately $180.0 million during the first
four year period of the amendment (i.e., 2024 through 2027),
of which approximately $135.0 million are expected during the remaining three
years of such four-year period (i.e., 2025 through 2027);
●
our belief that anti-rabies products based on equine serum are inferior to products made from human plasma;
●
our belief that the administration of CYTOGAM together with the available antivirals may provide additional protection in preventing
cytomegalovirus (“CMV”) disease for certain high-risk transplant populations, such as lung and heart transplant; and that there is an under-
utilization of CYTOGAM as CMV prophylaxis in high-risk patients who undergo a solid organ transplant due to the lack of collection and
presentation of new clinical and medical data and awareness regarding the benefits of combination of CYTOGAM and antiviral therapy, and
that by addressing these deficits, increased utilization of CYTOGAM can be achieved;
●
our belief that our ongoing clinical and medical affairs activities, which include collaborations with leading U.S.-based solid organ
transplantation experts, to generate and present new real-world data on the benefits of CYTOGAM, as well as planned prospective
investigator-initiated studies evaluating the benefits and potential innovative uses of CYTOGAM, continue to raise awareness for CYTOGAM
and support sustained sales growth;
●
our belief that our ongoing registration and marketing activities in additional countries, will support the continued usage of HEPAGAM B in
ex-U.S. markets;
●
our belief that we will be able to register our Proprietary Products, including CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF, in
additional countries where they are not currently registered, and our belief that this would lead to additional sales worldwide;
●
our expectations regarding the potential actions or inactions of existing and potential competitors of our products, including our belief that
there will be no new supplier of plasma derived AAT products in the U.S. or European markets in the near future;
●
our expectation that key U.S. physicians will publish new clinical data related to some of our products, and our belief that the educational
symposiums that they conduct will have a positive impact on the understanding of our portfolio and thereby contributing to continued growth
in demand;
●
our projection that changes in the product sales mix and geographic sales mix may have an effect on our sales and profitability;
●
our expectation to finalize the discussions with the IMOH regarding the potential extension of the supply agreement for the snake bite
antiserums until the end of 2025, in the coming weeks;
●
our ability to identify growth opportunities for existing products and our ability to identify and develop new product candidates;
●
our belief that the market opportunity for AAT products for the treatment of Alpha-1 Antitrypsin Deficiency (“AATD”) will continue to grow;
●
our expectation that the AATD’s diagnosis will continue to increase going forward as awareness of AATD increases;
iii
●
our expectation that the number of patients treated for AATD will continue to increase going forward as awareness of AATD increases, and
our expectation that additional European countries will approve such reimbursement during the coming years, based on recent
reimbursement approvals for treatment of AATD in a number of European countries;
●
our plan to continue to develop our pipeline, primarily focusing on the pivotal Phase 3 InnovAATe clinical trial of Inhaled AAT for the
treatment of AATD and to explore new strategic business development opportunities;
●
our ability to attract partners for development programs for Inhaled AAT for AATD in the United States and the European Union, and to
maintain such partnerships, if we decide to pursue such direction, as well as the impact on our business resulting from such partnerships, or
from a failure to form such partnerships or fully realize the benefits of such partnerships;
●
our intention to submit a revised statistical analysis plan (“SAP”) and study protocol for the InnovAATe study as an Investigational New
Drug Application (“IND”) amendment during the second half of 2025 and our expectation to receive additional feedback from the FDA
within a few months of submission, as well as our intention to approach the EMA Committee of Medicinal Products for Human Use
(“CHMP”) again after obtaining agreement from the FDA on the IND amendment;
●
our plan to reduce the InnovAATe study sample size from 220 patients to approximately 180 patients, and to conduct an interim futility
analysis by the end of 2025;
●
our forecast to complete recruitment for the InnovAATe study (Last Patient In) by the end of 2026 and complete the two years of treatment for
the last enrolled patient (Last Patient Out) by the end of 2028;
●
our belief that Inhaled AAT for AATD will increase patient convenience and reduce the need for patients to use intravenous infusions of AAT
products, thereby decreasing the need for clinic visits or nurse home visits and reducing medical costs;
●
our belief that Inhaled AAT for AATD, if approved, will enable us to treat significantly more patients from the same amount of plasma and
production capacity and may be more cost effective for patients and payors and may increase our profitability;
●
our belief that the inhaled formulation of AAT would be more effective in reducing inflammation of the lung tissue and inhibiting the
uncontrolled neutrophil elastase that causes the breakdown of the lung tissue and emphysema;
●
our intention to conduct a sub-study in North America in which approximately 30 patients will be evaluated for the effect of anti-drug
antibodies (“ADA”) on AAT levels in plasma with Inhaled AAT and IV AAT treatments and our plan to initiate such study during 2026;
●
our plan to test our anti-tuberculosis IgG product in-vivo during 2025;
●
our ability to obtain and/or maintain regulatory approvals for our products and new product candidates, the rate and degree of market
acceptance, and the clinical utility of our products;
●
our ability to maintain compliance with government regulations and licenses;
●
our plan to advance our other early-stage development programs until completion of proof-of-concept, at which point we plan to evaluate
continued internal development, partnering or out-licensing;
●
our intention to defend ourselves against the lawsuit filed against us by a third-party distributor with the tribunal of first instance in Geneva,
as a result of the termination of the distribution agreement for distribution of our Proprietary Products in Russia and Ukraine;
●
our belief that our current cash and cash equivalents and expected future cash to be generated by our operational activities will be sufficient
to satisfy our liquidity requirements for at least the next 12 months;
●
our expectation that our capital expenditures will increase in the coming years mainly due to the planned expansion of our plasma collection
operations as well as potentially to facilitate the transition of manufacturing of HEPGAM B, VARIZIG and WINRHO SDF to our
manufacturing facility in Beit Kama, Israel;
●
our expectations to pay, during the next 12 months, approximately $10.4 million on account of contingent consideration and assumed
liabilities, under the asset purchase agreement entered into with Saol in November 2021;
●
our ability to obtain and maintain protection for the intellectual property, trade secrets and know-how relating to or incorporated into our
technology and products;
●
our expectations regarding our ability to utilize Israeli tax incentives against future income; and
●
our expectations regarding taxation, including that we will not be classified as a passive foreign investment company for the taxable year
ending December 31, 2024, and beyond.
iv
All forward-looking statements
involve risks, assumptions and uncertainties. You should not rely upon forward-looking statements as predictors of
future events. The
occurrence of the events described, and the achievement of the expected results, depend on many events and factors, some or all of which
may not be predictable or within our control. Actual results may differ materially from expected results. See the sections “Item 3.
Key Information — D.
Risk Factors” and “Item 5. Operating and Financial Review and Prospectus,” as well as elsewhere
in this Annual Report, for a more complete discussion
of these risks, assumptions and uncertainties and for other risks, assumptions and
uncertainties. These risks, assumptions and uncertainties are not
necessarily all of the important factors that could cause actual results
to differ materially from those expressed in any of our forward-looking statements.
Other unknown or unpredictable factors also could
harm our results.
All of the forward-looking
statements we have included in this Annual Report are based on information available to us as of the date of this
Annual Report and speak
only as of the date hereof. We undertake no obligation, and specifically decline any obligation, to update publicly or revise any
forward-looking
statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions,
the
forward-looking events discussed in this Annual Report might not occur.
The audited consolidated
financial statements for the years ended December 31, 2024, 2023 and 2022 included in this Annual Report have been
prepared in accordance
with the international financial reporting standards (“IFRS”) as issued by the international accounting standards board (“IASB”).
Unless otherwise noted,
NIS amounts presented in this Annual Report are translated at the rate of $1.00 = NIS 3.647, the exchange rate published
by the
Bank of Israel as of December 31, 2024.
We have proprietary rights
to trademarks used in this Annual Report that are important to our business, many of which are registered under
applicable intellectual
property laws. Solely for convenience, trademarks and trade names referred to in this Annual Report may appear without the “®”
or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest
extent possible under applicable law,
our rights or the rights of the applicable licensor to these trademarks and trade names. We do not
intend our use or display of other companies’
trademarks, trade names or service marks to imply a relationship with, or endorsement
or sponsorship of us by, any other companies. Each trademark,
trade name or service mark of any other company appearing in this Annual
Report is the property of its respective holder.
v
PART I
Item 1. Identity of Directors, Senior Management
and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business, liquidity,
financial condition, and results of operations could be adversely affected, and even materially so, if any of the risks
described below
occur. As a result, the trading price of our securities could decline, and investors could lose all or part of their investment. This
Annual
Report including the consolidated financial statements contains forward-looking statements that involve risks and uncertainties.
Our actual results could
differ materially and adversely from those anticipated, as a result of certain factors, including the risks facing
the Company as described below and
elsewhere in the Annual Report. You should carefully consider the risks and uncertainties included
herewith. The risks and uncertainties described below
are not the only ones we face. Additional risks and uncertainties that we are unaware
of, or that we currently believe are not material, may also become
important factors that adversely affect our business. Material risks
that may affect our business, operating results and financial condition include, but are
not necessarily limited to, those relating to:
●
Our ability to maintain and expand sales of our commercial products portfolio in the United States and ex-U.S. markets is critical to our
growth, profitability and financial stability.
●
Our business is currently highly concentrated on our two leading
products, KEDRAB and CYTOGAM. Additionally, significant portion of our
sales and financial results for the years ended December 31,
2024, 2023 and 2022 was driven by royalty income generated from GLASSIA
sales by Takeda. Any adverse market event affecting such
products or revenue derived from such products could have a material adverse
effect on our business and financial
condition.
●
A significant portion of our net revenue has been and will continue to be driven from sales of our Proprietary Products, and in our largest
geographic region, the United States. Any adverse market event with respect to some of our Proprietary Products or the United States would
have a material adverse effect on our business.
●
Our long-term continued growth is dependent, in part, on our ability to continue to effectively utilize and continue to increase our
manufacturing plant capacity.
●
Our long-term continued growth is dependent on our ability to engage in additional strategic transactions to acquire assets, businesses,
products or technologies or engage in in-license or out-license transactions of products or technologies or form collaborations. Our inability
to secure such transactions on cost-effective terms or our inability to realize the anticipated benefits from these transactions, may negatively
affect our projected growth and operating results, dilute our shareholders’ ownership or cause us to incur debt or significant expense.
●
We have invested, and intend to continue to invest, in expanding our U.S. plasma collection operations in order to reduce our dependency on
third-party suppliers in terms of plasma supply needs as well as to generate sales from commercialization of collected normal source plasma,
and our ability to successfully expand this operation is important to support our future growth and profitability.
●
We have several product development candidates, including our Inhaled AAT for AATD as well as several other early-stage development
projects. There can be no assurance that the development activities associated with these products will materialize and result in the FDA,
EMA or any other relevant agencies granting us marketing authorization for any of these products.
1
●
In our Proprietary Products segment, we rely on Kedrion for the sales of our KEDRAB product in the United States, and any disruption to our
relationships with Kedrion would have an adverse effect on our future results of operations and profitability.
●
Sales of CYTOGAM, WINRHO SDF, HEPGAM B and VARIZIG in the U.S. market are critical in order to support future growth, future results
of operations and profitability.
●
Continued availability of CYTOGAM, WINRHO SDF, HEPAGAM B and VARIZIG is dependent on our ability to maintain continuous plasma
supply and maintain our relationship with third-party contract manufacturers and suppliers, and any disruption to such relationship could
have an adverse effect on the availability of these products, as well as our future results of operations and profitability.
●
We rely in large part on third parties for the sale, distribution and delivery of our Proprietary Products, and any disruption to our
relationships with these third-party distributors would have an adverse effect on our future results of operations and profitability.
●
Our Proprietary Products segment operates in a highly competitive market and could be negatively impacted by new competitors or the
adoption of new methods of administration.
●
Manufacturing of new plasma-derived products in our manufacturing facility, or the manufacture of Proprietary Products by third parties,
requires a lengthy and challenging development project and/or technology transfer project as well as regulatory approvals, all of which may
not materialize.
●
We could become supply-constrained, and our financial performance could suffer, if we were unable to obtain adequate quantities of source
plasma, plasma derivatives or specialty ancillary products that meet the regulatory requirements of the FDA, the EMA, Health Canada or the
regulatory authorities in Israel, or if our suppliers were to fail to modify their operations to meet regulatory requirements or if prices of
source plasma or plasma derivatives were to rise significantly.
●
Our Distribution segment is dependent on a few suppliers, and any disruption to our relationship with these suppliers, or their inability to
supply us with the products we sell, in a timely manner, in adequate quantities and/or at a reasonable cost, would have a material adverse
effect on our business, financial condition and results of operations.
●
In recent years we entered into agreements for future distribution in Israel of several biosimilar product candidates, and the successful future
distribution of these products, which is important for the continued growth of the Distribution segment as a whole, is dependent upon several
factors some of which are beyond our control.
●
Laws and regulations governing the conduct of international operations may negatively impact our development, manufacture, and sale of
products outside of the United States and require us to develop and implement costly compliance programs.
●
If our manufacturing facility in Beit Kama, Israel were to suffer a serious accident, contamination, force majeure event (including, but not
limited to, a war, terrorist attack, earthquake, major fire or explosion etc.) materially affecting our ability to operate and produce saleable
plasma-derived protein therapeutics, all of our manufacturing capacity could be shut down for an extended period.
●
Our success depends in part on our ability to obtain and maintain protection in the United States and other countries for the intellectual
property relating to or incorporated into our technology and products, including the patents protecting our manufacturing process.
●
We have incurred significant losses since our inception and while we have been profitable in recent years, we may not be able to sustain
profitability.
●
Our business requires substantial capital, including potential investments in large capital projects, to operate and grow and to achieve our
strategy of realizing increased operating leverage, for which we may incur debt or issue additional equity.
●
Our business could be adversely affected by political, economic and military instability in Israel and its region.
●
Our business and operations would suffer in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber
security measures.
2
Risks Related to Our Business
Our ability to maintain and expand sales
of our commercial products portfolio in the United States and ex-U.S. markets is critical to our growth,
profitability and financial stability.
Our portfolio of products
in our Proprietary Products segment (which we refer to as our Proprietary Products), comprising of KEDRAB,
CYTOGAM, GLASSIA, WINRHO SDF,
HEPGAM B and VARIZIG are currently distributed in the U.S. market, where we market and distribute some of
these products directly based
on our sales and marketing personnel, and in approximately 30 additional ex-U.S. international markets, including the Middle
East and
North Africa (“MENA”) region. Our future growth, profitability and financial stability depend on our ability to successfully
maintain and expand
our U.S.-based commercial and distribution infrastructure, as well as our ex-U.S. commercialization efforts. While
we continuously seek to leverage our
existing strong international distribution network to increase our commercial revenue in the existing
markets in which we sell our products and to expand to
geographic markets in which these products are not currently sold, we may not be
successful in growing our sales in existing markets or developing
additional markets for these products. Given continued market dynamics
and competition in the markets we operate, as well as other operational, technical,
regulatory, financial and compliance challenges, we
may not be able to maintain or continue to expand our existing commercial operations, which may
materially adversely affect our business
and financial condition.
Our business is currently highly concentrated
on our two leading products, KEDRAB and CYTOGAM. Additionally, significant portion of our sales
and financial results
for the years ended December 31, 2024, 2023 and 2022 was driven by royalty income generated from GLASSIA sales by Takeda.
Any adverse
market event affecting such products or revenue derived from such products could have a material adverse effect on our business and
financial
condition.
Our business currently relies
on the sales of KEDRAB, our Human Rabies Immune Globulin (HRIG), and CYTOGAM, our Cytomegalovirus
Immune Globulin Intravenous (Human)
(“CMV-IGIV”), and royalty income from sales of GLASSIA, our intravenous AAT product, by Takeda. Revenue
generated by these
products comprised approximately 31%, 14% and 10%, respectively (55% in total), of our total revenues for the year ended December
31,
2024. In the event that KEDRAB or CYTOGAM were to lose significant sales or were to be substantially or completely displaced in the market,
we
would lose a significant and material source of our total revenues. Similarly, if these products were to become the subject of litigation
and/or an adverse
governmental action or ruling causing us to cease the manufacturing, export or sales of these products, our business
and financial condition would be
adversely affected.
We are entitled to royalty
payments from Takeda on GLASSIA sales in the United States and, commencing in 2024, in Canada (as well as in
Australia and New Zealand,
to the extent GLASSIA will be approved and sales will be generated in these other markets) at a rate of 12% on net sales
through August
2025, and at a rate of 6% thereafter until 2040, with a minimum of $5 million annually, for each of the years from 2022 to 2040. For the
years ended December 31, 2024, and 2023 and the period between March and December 2022, we accounted for $16.9, $16.1 million and $12.2
million,
respectively, of sales-based royalty income from Takeda, and based on forecasted future growth, we project receiving royalties
from Takeda in the range of
$10 million to $20 million per year during 2025 to 2040. Any reduction in sales of GLASSIA by Takeda or reduction
in the manufacturing and marketing
of GLASSIA by Takeda for any reason (including due to the inability to adequately or sufficiently manufacture
GLASSIA, regulatory limitations,
difficulties in marketing, reduction in market size, or changes in corporate focus), would adversely
impact our future expected royalty income from
Takeda’s sales of GLASSIA, which would have an adverse effect on our revenues and
profitability.
A significant portion of our net revenue
has been and will continue to be driven from sales of our Proprietary Products, and in our largest geographic
region, the United States.
Any adverse market event with respect to some of our Proprietary Products or the United States would have a material
adverse effect on
our business.
A significant portion of our
revenues has been, and will continue to be, derived from sales of our Proprietary Products, including those of
KEDRAB, CYTOGAM, GLASSIA,
WINRHO SDF, HEPGAM B and VARIZIG, as well as royalty income from GLASSIA sales by Takeda. Revenue
from our Proprietary Products comprised
approximately 88%, 81% and 79% of our total revenues for the years ended December 31, 2024, 2023 and 2022,
respectively. If some of our
Proprietary Products were to lose significant sales or were to be substantially or completely displaced in the market, we would
lose a
significant and material source of our total revenues. Similarly, if any of these Proprietary Products were to become the subject of litigation
and/or an
adverse governmental action or ruling causing us or third parties to cease the manufacturing, export or sales of these products,
our business and financial
condition would be adversely affected.
A significant portion of our
sales and income are generated in the United States, comprising approximately 62%, 52% and 50% of our total
revenues for the years ended
December 31, 2024, 2023 and 2022, respectively. If our sales or income generated in the United States were significantly
impacted by material
changes to government or private payor reimbursement, other regulatory developments, competition or other factors, then our
business and
financial condition would be adversely affected.
3
Our long-term continued growth is dependent,
in part, on our ability to continue to effectively utilize and continue to increase our manufacturing plant
capacity.
Our manufacturing facility
is currently utilized to manufacture some of our Proprietary Products, including KEDRAB/KAMRAB, CYTOGAM
and GLASSIA, as well as small
quantities of KAMRHO (D) and anti-snake venom products and clinical lots needed for the Inhaled AAT clinical study. In
the future, we
may expand the utilization of our manufacturing facility to include the manufacturing of WINRHO SDF, HEPGAM B and VARIZIG, which
would
be subject to a technology transfer, regulatory approvals and the execution of a new, revised contract manufacturing agreement with Emergent.
In
addition, we may also consider utilizing our plant in the future for the manufacturing of products for other companies as a contract
manufacturing
organization (CMO). While we have the know-how and expertise to support the manufacturing of additional products in our
facility, we may not be able to
complete the required technology transfers or obtain required regulatory approvals in the expected timeline,
or at all. Further, we may not be able to
increase the manufacturing capacity at our facility, even if there will be increased market
demand for these products at a profitable market price in the
markets in which we distribute our products or other markets. Our inability
to effectively utilize and continue to increase our manufacturing plant capacity
may prevent us from continuing to grow our business and
result in a loss of commercial opportunities. Failure to adequately or timely adapt our
manufacturing volume, or that of our CMOs, as
needed, may lead to an inability to supply products, may have an adverse effect on our business, could
cause substantial harm to our business
reputation, result in breach of our sales agreements or the loss of future customers and orders. In addition, the risk of
not adequately
managing plant utilization could result in inefficiencies, reduced profitability and operating losses. See also “—Manufacturing
of new
plasma-derived products in our manufacturing facility requires a lengthy and challenging development project and/or technology
transfer project as well
as regulatory approvals, all of which may not materialize.”
Our long-term continued growth is dependent
on our ability to engage in additional strategic transactions to acquire assets, businesses, products or
technologies or engage in in-license
or out-license transactions of products or technologies or form collaborations. Our inability to secure such
transactions on cost-effective
terms or our inability to realize the anticipated benefits from these transactions, may negatively affect our projected
growth and operating
results, dilute our shareholders’ ownership or cause us to incur debt or significant expense.
As part of our business development
and growth strategy, we have in the past and are actively exploring potential strategic transactions to acquire
assets, businesses, or
products; or engage in in-licensing or out-licensing transactions with respect to products or technologies; or enter into other strategic
alliances or collaborations for both our Proprietary Products and Distribution segments. These opportunities may involve the acquisition
or in-licensing of
new products for commercialization (with or without manufacturing), as well as in-licensing agreements to manufacture
plasma-derived or other products
for other companies, which can provide additional revenue streams and leverage our biopharmaceuticals
and plasma-derived manufacturing expertise. We
may not identify additional suitable transactions, or complete such transactions in a timely
manner, on a cost-effective basis, or at all. Moreover, we may
devote resources to potential opportunities that are never completed, or
we may incorrectly judge the value or worth of such opportunities. Even if we
successfully execute a strategic transaction, we may not
be able to realize the anticipated benefits of such transaction, may incur debt or assume unknown
or contingent liabilities in connection
therewith, and may experience losses related to our investments or dispositions. Integration of an acquired company
or assets into our
existing business or a transition of an asset to an acquirer or partner may not be successful and may disrupt ongoing operations, require
the hiring of additional personnel and the implementation of additional internal systems and infrastructure, and require management resources
that would
otherwise focus on developing our existing business. Even if we are able to achieve the long-term benefits of a strategic transaction,
our expenses and
short-term costs may increase materially and adversely affect our liquidity. Any of the foregoing could have a material
effect on our business, results of
operations and financial condition.
We have invested, and intend to continue
to invest, in expanding our U.S. plasma collection operations in order to reduce our dependency on third-
party suppliers in terms of plasma
supply needs as well as to generate sales from commercialization of collected normal source plasma, and our ability
to successfully expand
this operation is important to support our future growth and profitability.
We own an FDA-licensed plasma
collection center in Beaumont, Texas that we acquired in March 2021, which specializes in the collection of
hyper-immune plasma to be
used in the manufacture of KAMRHO (D), KAMRAB and KEDRAB. In 2024, we significantly expanded our hyper-immune
plasma collection operations
with the opening of our new plasma collection center in Houston, Texas, which is expected to become one of the largest
hyper-immune plasma
collection sites in the United States and will also collect normal source plasma for sale to third parties. In addition, we are in the
advanced stages of construction of our third plasma collection site in San Antonio, Texas, which is expected to open by the end of the
first quarter of 2025.
We may, in the future, leverage our experience with plasma collection to establish additional plasma collection
centers in the United States.
We believe that the expansion
of our plasma collection operations will allow us to better support our hyperimmune plasma needs and reduce our
dependency on third-party
suppliers as well as generate revenues through sales from commercialization of collected normal source plasma. However, given
our limited
prior experience in managing plasma collection operations, the operational, technical, and regulatory challenges in establishing and maintaining
plasma collection operations, as well as the challenges in screening locations, in negotiating the lease and other third party agreements
required for the
ongoing operations of the centers, the financial investment required to expand our collection capabilities and open new
collection centers and the
management of an expanded scope of plasma collection operations, we may not be able to realize our investment
and the anticipated benefits of such
activities. Further, we may not be able to adequately collect sufficient quantities of plasma through
our plasma collection operations to support our plasma
sourcing needs, including due to a lack of appropriate or sufficient donors for
specialty plasma, which will result in continued dependency on third party
suppliers; and even if we are successful in collection of sufficient
quantities, there can be no assurance that we will be able to reduce the cost of plasma
through our collection operations, as compared
to costs associated with procuring plasma from third parties. In addition, there could be no assurance that
we will be able to collect
adequate quantities of normal source plasma as well as secure supply agreements with customers at adequate prices or that there
will be
sufficient demand for normal source plasma. See also “—We could become supply-constrained, and our financial performance
could suffer, if we
were unable to obtain adequate quantities of source plasma, plasma derivatives or specialty ancillary products that
meet the regulatory requirements of the
FDA, the EMA, Health Canada or the regulatory authorities in Israel, or if our suppliers were
to fail to modify their operations to meet regulatory
requirements or if prices of source plasma or plasma derivatives were to rise significantly”;
and “—Our long-term continued growth is dependent on our
ability to engage in additional strategic transactions
to acquire assets, businesses, products or technologies or engage in in-license or out-license
transactions of products or technologies
or form collaborations. Our inability to secure such transactions on cost-effective terms or our inability to realize
the anticipated
benefits from these transactions, may negatively affect our projected growth and operating results, dilute our shareholders’ ownership
or
cause us to incur debt or significant expense.”
4
We have several product development candidates,
including our Inhaled AAT for AATD as well as several other early-stage development projects.
There can be no assurance that the development
activities associated with these products will materialize and result in the FDA, EMA or any other
relevant agencies granting us marketing
authorization for any of these products.
We are engaged in research
and development activities with respect to several pharmaceutical products candidates, including our lead
investigational product, Inhaled
AAT for AATD, for which we are continuing to progress the InnovAATe clinical trial, a randomized, double-blind,
placebo-controlled, pivotal
Phase 3 trial. In January 2025, we announced that the FDA confirmed its agreement with our proposal to change the two-sided
Type 1 error
rate control from 5% to 10% (p-value of 0.1) for the pivotal Phase 3 InnovAATe clinical trial. Based on this change in the p-value, as
well as
additional expected revisions to the study’s SAP, we plan to reduce the study sample size from 220 patients to approximately
180 patients, while
maintaining the trial’s statistical power. We plan to submit the revised SAP to the FDA and to conduct an interim
futility analysis for the InnovAATe
clinical study by the end of 2025. Based on the results of the interim futility analysis we may determine
to terminate the study early, which could negatively
impact our business prospects and stock price. Even if we will not be required to
consider termination of the study due to futility, there is no assurance that
we will be able to successfully complete the InnovAATe clinical
trial or that the trial results will be sufficient to obtain FDA and EMA approval.
Furthermore, we are currently
engaged in the early-stage development of other plasma derived product candidates for which we made progress
during 2024. However, there
can be no assurance that the development activities associated with these products will materialize and result in the FDA,
EMA or any
other relevant agencies granting us marketing authorization for any of these products.
For additional information
regarding the InnovAATe clinical study and our other development programs see — “Item 4. Information on the
Company —
Business Overview— Our Development Product Pipeline.” See also “—Research and development efforts invested
in our pipeline of
specialty and other products may not achieve expected results” and “—If we are unable to successfully
introduce new products and indications or fail to
keep pace with advances in technology, our business, financial condition and results
of operations may be adversely affected.”
Risks Related to Our Proprietary Products Segment
In our Proprietary Products segment, we
rely on Kedrion for the sales of our KEDRAB product in the United States, and any disruption to our
relationships with Kedrion would have
an adverse effect on our future results of operations and profitability.
Pursuant to the strategic distribution and supply agreement with Kedrion
for the marketing of KEDRAB in the United States, Kedrion is the sole
distributor of KEDRAB in the United States. Sales to Kedrion accounted
for approximately 31%, 23% and 13% of our total revenues in the years ended
December 31, 2024, 2023 and 2022, respectively. We are dependent
on Kedrion for its marketing and sales of KEDRAB in the United States. Under the
strategic distribution and supply agreement, as amended
in January 2025, which superseded and memorialized the terms of a binding memorandum of
understanding with Kedrion for the amendment and
extension of the distribution agreement between the parties, entered into in December 2023, Kedrion
committed to purchasing minimum quantities
of KEDRAB during the first four years (i.e., 2024 through 2027) of the eight-year term, that began in January
2024, generating projected
minimum aggregate revenues for us of approximately $180.0 million over such four-year period, of which a minimum of
approximately $135.0
million is to be acquired during the remaining three years of such four-year period (i.e., 2025 through 2027). According to the
distribution
agreement, Kedrion shall have the right to extend the agreement, by written notice no later than December 31, 2030, for an additional
two
years, until December 31, 2033.
We currently also purchase
from a subsidiary of Kedrion, KedPlasma LLC (“Kedplasma”), a large portion of the hyper-immune plasma, which is
used for the
production of KEDRAB/KAMRAB. See “—We could become supply-constrained, and our financial performance could suffer, if we
were
unable to obtain adequate quantities of source plasma, plasma derivatives or specialty ancillary products that meet the regulatory
requirements of the
FDA, the EMA, Health Canada or the regulatory authorities in Israel, or if our suppliers were to fail to modify their
operations to meet regulatory
requirements or if prices of source plasma or plasma derivatives were to rise significantly.”
If we do not maintain the
distribution relationship with Kedrion, we would be required to assume the sales and marketing activities of KEDRAB,
or we would need
to engage a replacement distributor for the product in the United States. Further, if we fail to maintain the plasma supply agreement
with
KedPlasma we would need to expedite the collection ramp-up at our existing plasma collection centers and/or find a replacement supplier
of the hyper-
immune plasma, which is used to manufacture KEDRAB/ KAMRAB. Establishing a relationship with a new distributor or supplier
or internalizing those
activities, could lead to a decrease in KEDRAB/ KAMRAB sales and a deterioration in our market share when compared
with one or more of our
competitors. Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability.
Sales of CYTOGAM, WINRHO SDF, HEPGAM B and
VARIZIG in the U.S. market are critical in order to support future growth, future results of
operations and profitability.
Sales of CYTOGAM, WINRHO SDF,
HEPGAM B and VARIZIG in the U.S. market represented approximately 24%, 21% and 30% of our
Proprietary Product segment sales for the years
ended December 31, 2024, 2023 and 2022. To facilitate the sale and distribution of these products in the
U.S. market, the Company established
commercial operations in the United States at the beginning of 2022, which included contracting with a third-party
logistics (3PL) provider,
contracting with pharmaceutical wholesalers and regional distributors, hiring Sales, Medical, Trade and Market Access
professionals, establishing
relationships with Key Opinion Leaders (“KOL”), supporting Health Care Professionals in conducting investigator-initiated
trials
and publishing new data in support of the Company’s portfolio of products. However, given our limited prior experience in directly managing
U.S.
commercial and medical operations and the operational, technical, regulatory and compliance challenges in maintaining such activity,
as well as the
significant costs involved in such operations, we may not be able to realize the anticipated benefits of such activities,
and may not be able to adequately
maintain or expand market demand and continued product sales, which may result in significant reduction
in sales, increased operating costs and reduced
profitability and may adversely impact our future growth. See “— Our ability
to maintain and expand sales of our commercial products portfolio in the
U.S. and ex-U.S. markets is critical to our profitability and
financial stability.” See also – “Item 4B. Information on the Company — Business Overview
— Proprietary
Products Segment.”
5
Continued availability of CYTOGAM, WINRHO
SDF, HEPAGAM B and VARIZIG is dependent on our ability to maintain continuous plasma supply
and maintain our relationship with third-party
contract manufacturers and suppliers, and any disruption to such relationship could have an adverse
effect on the availability of these
products, as well as our future results of operations and profitability.
CYTOGAM is manufactured at
our facility in Beit Kama, Israel since 2023. To manufacture CYTOGAM, we engaged Prothya Biosolutions
Belgium (“Prothya”)
as a third-party contract manufacturer to perform certain manufacturing activities required for the manufacturing of the product. In
addition,
CMV hyper-immune plasma for the manufacturing of CYTOGAM is supplied by CSL Behring Ltd. (“CSL Behring”) through a dedicated
plasma
supply agreement. We have limited control and supervision over the operational processes of these organizations, which could affect
our ability to maintain
quality standards and could lead to business or legal disputes with these organizations. If we fail to maintain
our relationship with these entities, or if these
entities fail to operate in compliance with regulatory and compliance requirements,
we could face supply shortages, which could adversely impact our
ability to manufacture and supply CYTOGAM and could incur increased costs
in finding replacement vendors. Delays in establishing a relationship with
new vendors could lead to a decrease in CYTOGAM sales and a
deterioration in our market position when compared with one or more of our competitors.
Any of the foregoing developments could have an
adverse effect upon our sales, margins and profitability.
WINRHO SDF, HEPAGAM B and
VARIZIG are currently manufactured by Emergent under a contract manufacturing agreement, which was
assigned to us by Saol upon the consummation
of the acquisition. We are currently dependent on Emergent to secure the supply of adequate quantities of
plasma needed to timely manufacture
these products and we rely on their manufacturing, quality and regulatory systems to ensure that the manufacturing
process complies with
current Good Manufacturing Practice (“cGMP”) standards and any other regulatory requirements, and that each product
manufactured
meets its specifications and is appropriately released for human consumption.
If we fail to maintain our
relationship with Emergent, or if Emergent fails to operate in compliance with cGMP and other regulatory requirements,
we could face supply
shortages and may not be able to supply these products. In addition, such failure may result in increased costs and delays in
transferring
the manufacturing of the products to our plant in Beit Kama, Israel, or in finding a replacement manufacturer for these products and we
might
be required to identify a replacement supplier of the plasma which is used to produce these products. Delays in internalizing the
production or establishing
a relationship with a new manufacturer could lead to a decrease in these products’ sales and a deterioration
in our market share when compared with one or
more of our competitors. Any of the foregoing developments could have an adverse effect
upon our sales, margins and profitability. See also “—
Manufacturing of new plasma-derived products in our manufacturing
facility requires a lengthy and challenging development project and/or technology
transfer project as well as regulatory approvals, all
of which may not materialize.”
Certain of our sales in our Proprietary
Products segment rely on our ability to win tender bids based on the price and availability of our products in
public tender processes.
Certain of our sales in our
Proprietary Products segment rely on our ability to win tender bids in certain markets, including those of the World
Health Organization
("WHO") and other similar health organizations. Our ability to win bids may be materially adversely affected by competitive
conditions in such bid process. Our existing and new competitors may also have significantly greater financial resources than us, which
they could use to
promote their products and business. Greater financial resources would also enable our competitors to substantially
reduce the price of their products or
services. If our competitors are able to offer prices lower than us, our ability to win tender bids
during the tender process will be materially affected and
could reduce our total revenues or decrease our profit margins.
We rely in large part on third parties for
the sale, distribution and delivery of our Proprietary Products, and any disruption to our relationships with
these third-party distributors
would have an adverse effect on our future results of operations and profitability.
We engage third party distributors
to distribute and sell our Proprietary Products in ex-U.S. markets (other than the Israeli market). Sales through
such distributors accounted
for approximately 22%, 26% and 25% of our total revenues in the years ended December 31, 2024, 2023 and 2022,
respectively, and we expect
such sales to increase in 2025 and beyond. We are dependent on these third parties for successful marketing, distribution and
sales of
our Proprietary Products in these markets. If such third parties were to breach, terminate or otherwise fail to perform under our agreements
with
them, our ability to effectively distribute our Proprietary Products would be impaired and our business could be adversely affected.
Moreover,
circumstances outside of our control, such as a general economic decline, market saturation or increased competition, may influence
the successful
renegotiation of our contracts or the securing of favorable terms.
6
In addition to distribution
and sales, these third-party distributors are, in some cases, responsible for the regulatory registration of our products in
the local
markets in which they operate, as well as responsible for participation in tenders for sale of our products. Failure of these third-party
distributors
to obtain and maintain such regulatory approvals and/or win tenders or provide competitive prices to our products may adversely
affect our ability to sell
our Proprietary Products in these markets, which in turn will negatively affect our revenues and profitability.
In addition, our inability to sell our
Proprietary Products in these markets may reduce our manufacturing plant utilization and effectiveness
and may lead to additional reduction of profitability.
In the U.S. market we utilize
a 3PL provider in connection with the distribution of CYTOGAM, WINRHO SDF, HEPGAM B and VARIZIG,
which provides complete order to cash
services. If such 3PL provider were to breach, terminate or otherwise fail to adequately perform under our
agreement with it, including
inadequate inventory management, transportation delays and incorrect temperature control during storage and handling, fails
to issue invoices
correctly or on a timely basis and/or fails to collect payments due to us from our U.S. customers, our ability to effectively distribute
such
products would be impaired, which could negatively impact our business operations and financial performance.
Disputes with distributors
have arisen in the past and disputes may arise in the future, that cause the delay or termination of the development,
manufacturing, supply
or commercialization of our product candidates, or could result in costly litigation or arbitration that diverts management’s attention
and resources. In May 2022, we terminated a distribution agreement with a third-party engaged to distribute our Propriety Products in
Russia and Ukraine
(the “Distributor”) and a power of attorney granted in connection with such distribution agreement to an
affiliate of the Distributor (the “Affiliate”). On
June 13, 2023, the Affiliate filed its Statement of Claim with the tribunal
of first instance in Geneva, seeking alleged damages in the total amount of $6.7
million. We have filed a motion with the tribunal of
first instance in Geneva challenging its jurisdiction over the Affiliate’s claims, submitting that such
claims should have been
brought before an arbitral tribunal, as contractually agreed between the parties. In December 2024, we were advised by the
tribunal of
first instance in Geneva that it possesses all the necessary information to decide on its jurisdiction and its decision is expected in
the coming
months. Until the tribunal of first instance in Geneva rules on the motion, the Affiliate’s claims will not be heard.
No final decision has been made to date.
At this time, it is not possible to assess the prospects of the claim against us and any potential
liabilities and impact on our business. See “Item 4B.
Information on the Company — Business Overview — Legal Proceedings.”
Our Proprietary Products segment operates
in a highly competitive market and could be negatively impacted by new competitors or the adoption of new
methods of administration.
Our Proprietary Products compete
with products distributed by well-established biopharmaceutical companies, including several large competitors
in the plasma industry.
These large competitors include CSL Behring, Takeda, and Grifols S.A. (“Grifols”), which acquired a previous competitor, Talecris
Biotherapeutics, Inc. (“Talecris”) in 2011, Octapharma, Kedrion (other than for KEDRAB), Biotest AG and ADMA Biologics Inc.
(“ADMA”). We
compete against these companies for, among other things, licenses, expertise, clinical trial patients and investigators,
consultants and third-party strategic
partners. We also compete with these companies for market share for certain products in the Proprietary
Products segment. Our large competitors have
advantages in the market because of their size, financial resources, markets and the duration
of their activities and experience in the relevant market,
especially in the United States and countries of the European Union. As a result,
they may be able to devote more funds to research and development and
new production technologies, as well as to the promotion of their
products and business. These competitors may also be able to sustain longer periods of
substantial reduction in the price of their products
or services. These competitors also have an additional advantage regarding the availability of raw
materials, as they own or control multiple
plasma collection centers and/or plasma fractionation facilities.
In addition, our plasma-derived
protein therapeutics face, or may face in the future, competition from existing or newly developed non-plasma
products and other courses
of treatments. New treatments, such as antivirals, gene therapies, small molecules, correctors, monoclonal or recombinant
products, may
also be developed for indications for which our products are now used, as well as courses of treatments such as subcutaneous treatment.
Our hyper-immune IgG products
in the Proprietary Products segment face competition from several competing plasma derived products and non-
plasma derived pharmaceuticals,
mainly anti-viral. See “Item 4B “Information on the Company — Business Overview— Competition — Proprietary
Products Segment.”
In the AAT market, our two
main competitors are Grifols and CSL Behring. For details regarding their competing products, see “Item 4B
“Information on
the Company — Business Overview— Competition — Proprietary Products Segment.” In addition, we estimate that each
of Grifols and
CSL Behring owns more than 300 operating plasma collection centers located across the United States.
Furthermore, several of our
competitors are conducting preclinical and clinical trials for the development of gene therapy, recombinant AAT, small
molecule treatment
or correctors for AATD, which if successfully developed and launched, could adversely impact our revenue and growth of sales of
GLASSIA
or GLASSIA-related royalties as well as affect our ability to launch our Inhaled AAT product, if approved. For example, in January 2024,
Inhibrx and Sanofi announced that the companies have entered into a definitive agreement under which Aventis Inc., a subsidiary of Sanofi,
will acquire all
the assets and liabilities associated with INBRX-101, which was indicated to be in a registrational trial for the treatment
of patients with AATD.
7
Similarly, if a new AAT formulation
or a new route of administration with significantly improved characteristics is adopted (including, for
example, aerosol inhalation or
self-administering by way of subcutaneous route of administration), the market share of our current AAT product,
GLASSIA, could be negatively
impacted. While we are in the process of developing Inhaled AAT for AATD, our competitors may also be attempting to
develop similar products.
While these products may be in various stages of development, they may eventually be successfully developed and launched.
Our products generally do
not benefit from patent protection and compete against similar products produced by other providers. Additionally, the
development by
a competitor of a similar or superior product or increased pricing competition may result in a reduction in our net sales or a decrease
in our
profit margins.
Our products involve biological intermediates
that are susceptible to contamination and the handling of such intermediates and our final products
throughout the supply chain and manufacturing
process requires cold-chain handling, all of which could adversely affect our operating results.
Plasma and its derivatives
are raw materials that are susceptible to damage and contamination and may contain microorganisms that cause diseases
in humans, commonly
known as human pathogens, any of which would render such materials unsuitable as raw material for further manufacturing. Almost
immediately
after collection from a donor, plasma and plasma derivatives must be stored and transported at temperatures that are at least -20 degrees
Celsius (-4 degrees Fahrenheit). Improper storage or transportation of plasma or plasma derivatives by us or third-party suppliers may
require us to destroy
some of our raw material. In addition, plasma and plasma derivatives are also suitable for use only for certain
periods of time once removed from storage.
If unsuitable plasma or plasma derivatives are not identified and discarded prior to release
to our manufacturing processes, it may be necessary to discard
intermediate or finished products made from such plasma or plasma derivatives,
or to recall any finished product released to the market, resulting in a
charge to cost of goods sold and harm to our brand and reputation.
Furthermore, if we distribute plasma-derived protein therapeutics that are produced from
unsuitable plasma because we have not detected
contaminants or impurities, we could be subject to product liability claims and our reputation would be
adversely affected.
Despite overlapping safeguards,
including the screening of donors and other steps to remove or inactivate viruses and other infectious disease-
causing agents, the risk
of transmissible disease through plasma-derived protein therapeutics cannot be entirely eliminated. If a new infectious disease was
to
emerge in the human population, the regulatory and public health authorities could impose precautions to limit the transmission of the
disease that would
impair our ability to manufacture our products. Such precautionary measures could be taken before there is conclusive
medical or scientific evidence that a
disease poses a risk for plasma-derived protein therapeutics. In recent years, new testing and viral
inactivation methods have been developed that more
effectively detect and inactivate infectious viruses in collected plasma. There can
be no assurance, however, that such new testing and inactivation methods
will adequately screen for, and inactivate, infectious agents
in the plasma or plasma derivatives used in the production of our plasma-derived protein
therapeutics. Additionally, this could trigger
the need for changes in our existing inactivation and production methods, including the administration of new
detection tests, which could
result in delays in production until the new methods are in place, as well as increased costs that may not be readily passed on to
our
customers.
Plasma and plasma derivatives
can also become contaminated through the manufacturing process itself, such as through our failure to identify and
purify contaminants
through our manufacturing process or failure to maintain a high level of sterility within our manufacturing facilities.
Once we have manufactured
our plasma-derived therapeutics, they must be handled carefully and kept at appropriate temperatures. Our failure, or
the failure of third
parties that supply, ship, store or distribute our products, to properly care for our plasma-derived products, may result in the requirement
that such products be destroyed.
While we expect work-in-process
inventories scraps in the ordinary course of business because of the complex nature of plasma and plasma
derivatives, our processes and
our plasma-derived therapeutics, unanticipated events may lead to write-offs and other costs in amounts materially higher
than our expectations.
We have, in the past, experienced situations that have caused us to write-off the value of inventories. Such write-offs and other costs
could materially adversely affect our operating results. Furthermore, contamination of our plasma-derived protein therapeutics could cause
consumers or
other third parties with whom we conduct business, to lose confidence in the reliability of our manufacturing procedures,
which could materially adversely
affect our sales and operating results.
Our ability to continue manufacturing and
distributing our plasma-derived therapeutics depends on continued adherence by us and contract
manufacturers to current Good Manufacturing
Practice regulations.
The manufacturing processes
for our products are governed by detailed written procedures and regulations that are set forth in cGMP requirements
for blood products,
including plasma and plasma derivative products. Failure to adhere to established procedures or regulations, or to meet a specification
set forth in cGMP requirements, could require that a product or material be rejected and destroyed. There are relatively few opportunities
for us or contract
manufacturers to rework, reprocess or salvage nonconforming materials or products. Any failure in cGMP inspection will
affect marketing in other
territories, including the U.S. and Israel.
8
The adherence by us and our
contract manufacturers to cGMP regulations and the effectiveness of applicable quality control systems are
periodically assessed through
inspections of the manufacturing facility, including our manufacturing facility in Beit Kama, Israel, by the FDA, the IMOH
and regulatory
authorities of other countries. Such inspections could result in deficiency citations, which would require us or our contract manufacturers
to
take action to correct those deficiencies to the satisfaction of the applicable regulatory authorities. If serious deficiencies are
noted or if we or our contract
manufacturers are unable to prevent recurrences, we may have to recall products or suspend operations until
appropriate measures can be implemented. The
FDA could also stop the import of products into the United States if there are potential
deficiencies. Such deficiencies may also affect our ability to obtain
government contracts in the future. We are required to report certain
deviations from procedures to the FDA. Even if we determine that the deviations were
not material, the FDA could require us or our contract
manufacturers to take certain measures to address the deviations. Since cGMP reflects ever-evolving
standards, we regularly need to update
our manufacturing processes and procedures to comply with cGMP. These changes may cause us to incur additional
costs and may adversely
impact our profitability. For example, more sensitive testing assays (if and when they become available) may be required or
existing procedures
or processes may require revalidation, all of which may be costly and time-consuming and could delay or prevent the manufacturing of
a
product or launch of a new product.
We may face manufacturing stoppages and
other challenges associated with audits or inspections by regulatory agencies.
The regulatory authorities
may, at any time and from time to time, audit the facilities in which our products are manufactured. If any such
inspection or audit of
such facilities identifies a failure to comply with applicable regulations, or if a violation of our product specifications or applicable
regulations occurs independently of such an inspection or audit, the relevant regulatory authority may require remedial measures that
may be costly or time
consuming for us to implement and that may include the temporary or permanent suspension of commercial sales or
the temporary or permanent closure of
a facility. Any such remedial measures imposed upon us or with whom we contract, could materially
harm our business.
Manufacturing of new plasma-derived products
in our manufacturing facility, or the manufacture of Proprietary Products by third parties, requires a
lengthy and challenging development
project and/or technology transfer project as well as regulatory approvals, all of which may not materialize.
The manufacturing of newly
marketed or investigational plasma-derived products in our plant, or the manufacture of Proprietary Products by third
parties, requires
a lengthy and challenging development project and/or technology transfer project, which involves the transfer of the know-how and
capabilities
to manufacture the new product. Such projects are usually complex and involve investment of significant time (approximately three to four
years) and resources. There is no assurance that such development and/or technology transfer projects will be successful and will allow
us to manufacture
the new product according to its required specifications.
Such development and/or technology
transfer projects require regulatory approval by the FDA and/or EMA and/or Health Canada or other
relevant regulatory agencies. Obtaining
such regulatory approval may require activities such as the manufacturing of comparable batches and/or performing
comparability non-clinical
and/or clinical studies between the product manufactured by its existing manufacturer and the product manufactured at our
manufacturing
facility. There is no assurance that we will be able to provide supporting comparability results that meet all regulatory requirements
needed
to obtain the regulatory approval required to be able to commence commercial manufacturing of new plasma-derived products in our
manufacturing plant.
For example, any transfer to our manufacturing facility of the manufacture of WINRHO SDF, HEPGAM B and VARIZIG, which
would require the
execution of a new revised contract manufacturing agreement with Emergent, would be subject to a technology transfer
and regulatory approvals.
Additionally, development
and technology transfer projects may be adversely affected by a lack of cooperation from third-party manufacturers,
potentially leading
to delays, budget overruns, or gaps in knowledge transfer. Such lack of cooperation could hinder our ability to effectively transfer
necessary
know-how and capabilities, complicating the development and technology transfer process.
If we are unable to adequately
complete the required development and/or technology transfer projects or subsequently obtain the required
regulatory approvals, we will
not be able to meet commercial demand, incur additional costs and may suffer reduced profitability or operating losses.
We could become supply-constrained, and
our financial performance could suffer, if we were unable to obtain adequate quantities of source plasma,
plasma derivatives or specialty
ancillary products that meet the regulatory requirements of the FDA, the EMA, Health Canada or the regulatory
authorities in Israel, or
if our suppliers were to fail to modify their operations to meet regulatory requirements or if prices of source plasma or plasma
derivatives
were to rise significantly.
While we own and operate our
own plasma collection centers in the United States, our proprietary products continue to depend, to a large degree,
on our access to U.S.,
European or other territories’ hyper-immune plasma or plasma derivatives, such as fraction IV. Despite expanding and further
establishing
our U.S. plasma collection operations in order to reduce our dependency on third-party suppliers in terms of plasma supply needs, we currently
purchase these plasma products from third-party licensed suppliers, some of which are also responsible for the plasma fractionation process,
pursuant to
multiple purchase agreements. We have entered into (and in connection with our acquired four FDA approved products, we assumed)
a number of plasma
supply agreements with various third parties in the United States and Europe. These agreements contain various termination
provisions, including upon a
material breach of either party, force majeure and, with respect to supply agreements with strategic partners,
the failure or delay on the part of either party
to obtain the applicable regulatory approvals or the termination of the principal strategic
relationship. If we are unable to obtain required quantities of
source plasma or fraction IV plasma that meet the regulatory requirements
of the FDA, the EMA, Health Canada or the regulatory authorities in Israel from
these providers, we may be unable to find an alternative
cost-effective source.
9
In order for plasma and fraction
IV plasma to be used in the manufacturing of our plasma-derived protein therapeutics, the individual centers at
which the plasma is collected
must be registered with and meet the regulatory requirements of the relevant regulatory authorities, such as the FDA, the
EMA Health Canada
or the regulatory authorities in Israel. When a new plasma collection center is opened, and on an ongoing basis after its registration,
it
must be inspected by the applicable regulatory authority for compliance with cGMP and other regulatory requirements. An unsatisfactory
inspection could
prevent a new center from being established or lead to the suspension or revocation of an existing registration. If relevant
regulatory authorities determine
that a plasma collection center did not comply with cGMP in collecting plasma, we may be unable to use
and may ultimately destroy plasma collected from
that center, which may impact on our ability to timely meet our manufacturing and supply
obligations. Additionally, if noncompliance in the plasma
collection process is identified after the impacted plasma has been pooled with
compliant plasma from other sources, entire plasma pools, in-process
intermediate materials and final products could be impacted, such
as through product destruction or rework. Consequently, we could experience significant
inventory impairment provisions and write-offs,
which could adversely affect our business and financial results.
In addition, the plasma supplier’s
fractionation process must also meet standards of the FDA, the EMA, Health Canada or the regulatory
authorities in Israel. If a plasma
supplier is unable to meet such standards, we will not be able to use the plasma derivatives provided by such supplier,
which may impact
on our ability to timely meet our manufacturing and supply obligations.
The plasma collection process
is dependent on donors arriving in plasma collection centers and agreeing to donate plasma. Factors such as
changes in reimbursement rates,
competition for donors, and declining donor loyalty may lead to a decrease in the number of donors, which may negatively
impact our ability
to obtain adequate quantities of plasma. During major healthcare events (such as during the COVID-19 pandemic) the number of donors
attending
plasma collection centers decreases, which may adversely affect the availability of plasma and its derivatives. A significant shortage
in plasma
supply may adversely affect our ability to continue manufacturing our products, may result in shortages in our products in the
market, and may result in
reduced sales and profitability.
To the extent that we were
unable to obtain required quantities of source plasma or plasma derivatives that meet the regulatory standards of the
FDA, the EMA, Health
Canada or the regulatory authorities in Israel, we could be limited in our ability to maintain or increase current manufacturing
levels
of our plasma derived commercial products and product candidates. As a result, we could experience a substantial decrease in total revenues
or profit
margins, a potential breach of distribution agreements, a loss of customers, a negative effect on our reputation as a reliable
supplier of plasma derivative
products or a substantial delay in our production and strategic growth plans.
The ability to increase plasma
collections may be limited, our supply of plasma and plasma derivatives could be disrupted or the cost of plasma
and plasma derivatives
could increase substantially, as a result of numerous factors, including a reduction in the donor pool, increased regulatory
requirements,
decreased number of plasma supply sources due to consolidation and new indications for plasma-derived protein therapeutics, which could
increase demand for plasma and plasma derivatives and lead to shortages.
We also continue to be dependent
on a number of suppliers who supply specialty ancillary products used in the production process, such as
specific gels and filters. Each
of these specialty ancillary products is provided by a single, exclusive supplier. If these suppliers were unable to provide us
with these
specialty ancillary products, if our relationships with these suppliers deteriorate, if these suppliers fail to meet our vendors qualification
processes, or if these suppliers’ operations are negatively affected by regulatory enforcement due to noncompliance, the manufacture
and distribution of our
products would be materially adversely affected, which would adversely affect our sales and results of operations.
See “—If we experience equipment
difficulties or if the suppliers of our equipment or disposable goods fail to deliver
key product components or supplies in a timely manner, our
manufacturing ability would be impaired and our product sales could suffer.”
Some of our required specialty
ancillary products and other materials used in the manufacturing process are commonly used in the healthcare
industry worldwide. If the
global demand for these products increases due to healthcare issues, epidemics or pandemics, our ability to secure adequate
supply at
reasonable cost of such products may be negatively affected, which would materially adversely affect our ability to manufacture and distribute
our products, which would adversely affect our sales and results of operations.
In addition, regulatory requirements,
including cGMP regulations, continually evolve. Failure of our plasma suppliers to adjust their operations to
conform to new standards
as established and interpreted by applicable regulatory authorities would create a compliance risk that could impair our ability to
sustain
normal operations.
In addition, if the purchase
prices of the source plasma or plasma derivatives that we use to manufacture our Proprietary Products were to rise
significantly, we may
not be able to pass along these increased plasma and plasma-derivative prices to our customers. Prices in many of our principal
markets
are subject to local regulation and certain pharmaceutical products, such as plasma-derived protein therapeutics, are subject to price
controls. Any
inability to pass costs on to our customers due to these factors or others would reduce our profit margins. In addition,
most of our competitors have the
ability to collect their own source plasma or produce their own plasma derivatives, and therefore their
products’ prices would not be impacted by such a
price rise, and as a result any pricing changes by us in order to pass higher costs
on to our customers could render our products noncompetitive in certain
territories.
10
Disruption of the operations of our current
or any future plasma collection center due to regulatory impediments or otherwise would cause us to
become supply constrained and our
financial performance would suffer.
In March 2021, we acquired
our FDA-licensed plasma collection center in Beaumont, Texas, which specializes in the collection of hyper-immune
plasma to be used in
the manufacture of KAMRHO (D), KAMRAB and KEDRAB. In 2024, we significantly expanded our plasma collection operations
with the opening
of our new plasma collection center in Houston, Texas, which is expected to become one of the largest hyper-immune plasma collection
sites
in the United States and will also collect normal source plasma for sale to third parties. In addition, we are in the advanced stages
of construction of
our third plasma collection site in San Antonio, Texas, which is expected to open by the end of the first quarter of
2025. In the future we may leverage our
experience with plasma collection to establish additional plasma collection centers in the United
States, with the intention of collecting normal source
plasma to be sold for manufacturing by third parties, as well as hyper-immune specialty
plasma required for manufacturing of our Proprietary Products.
In order for plasma to be
used in the manufacturing of our products, the individual centers at which plasma is collected must be registered with
and meet the regulatory
requirements of the regulatory authorities, such as the FDA and the EMA, of those countries in which we sell our products. When a
new
plasma collection center is opened, it must be inspected on an ongoing basis after its approval by the FDA and the EMA for compliance
with cGMP
and other regulatory requirements, and these regulatory requirements are subject to change. An unsatisfactory inspection could
prevent a new center from
being established or risk the suspension or revocation of an existing registration. In order for a plasma collection
center to maintain its governmental
registration, its operations must continue to conform to cGMP and other regulatory requirements or
recommendations which may be applicable from time
to time.
If it would be determined
that any of our plasma collection centers did not comply with cGMP, or other regulatory requirements in collecting
plasma, we may be unable
to use and may ultimately be required to destroy plasma collected from that center, which would be recorded as a charge to cost
of goods.
Additionally, if noncompliance in the plasma collection process is identified after the impacted plasma has been pooled with compliant
plasma
from other sources, entire plasma pools, in-process intermediate materials and final products could be impacted. Consequently,
we could experience
significant inventory impairment provisions and write-offs if it was determined that any of our plasma collection
centers did not comply with cGMP in
collecting plasma.
We plan to increase our supplies
of plasma for use in our manufacturing processes through collections at our plasma collection centers. This
strategy is dependent upon
our ability to successfully establish and register any new center, to maintain compliance with all FDA and other regulatory
requirements
in all centers and to attract donors to our centers.
Our ability to increase and
improve the efficiency of plasma collection at any current or future plasma collection center may be affected by: (i)
changes in the economic
environment and population in selected regions where we operate plasma collection centers; (ii) the entry of competitive centers
into
regions where we operate; (iii) our misjudging the demographic potential of individual regions where we expect to increase production
and attract new
donors; (iv) unexpected facility related challenges; (v) unexpected management challenges at select plasma collection
centers; or (vi) changes to regulatory
requirements.
The biologic properties of plasma and plasma
derivatives are variable, which may impact our ability to consistently manufacture our products in
accordance with the approved specifications.
While our manufacturing processes
were developed to meet certain product specifications, variations in the biologic properties of the plasma or
plasma derivatives as well
as the manufacturing processes themselves may result in out of specification results during the manufacturing of our products.
While we
expect certain work-in-process inventories scraps in the ordinary course of business because of the complex nature of plasma and plasma
derivatives, our processes and our plasma-derived protein therapeutics, unanticipated events may lead to write-offs and other costs in
amounts that are
materially higher than our expectations. We have, in the past, experienced situations that have caused us to write-off
the value of our products. Such write-
offs and other costs could materially adversely affect our operating results.
The biologic properties of plasma and plasma
derivatives are variable, which may adversely impact our levels of product yield from our plasma or
plasma derivative supply.
Due to the nature of plasma,
there will be variations in the biologic properties of the plasma or plasma derivatives we purchase that may result in
fluctuations in
the obtainable yield of desired fractions, even if cGMP is followed. Lower yields may limit production of our plasma-derived protein
therapeutics
because of capacity constraints. If these batches of plasma with lower yields impact production for extended periods, we may not be able
to
fulfill orders on a timely basis and the total capacity of product that we are able to market could decline and our cost of goods sold
could increase, thus
reducing our profitability.
Usage of our products may lead to serious
and unexpected side effects, which could materially adversely affect our business and may, among other
factors, lead to our products being
recalled and our reputation being harmed, resulting in an adverse effect on our operating results.
The use of our plasma-derived
protein therapeutics may produce undesirable side effects or adverse reactions or events. For the most part, these
side effects are known,
are expected to occur at some frequency and are described in the products’ labeling. Known side effects of several plasma-derived
therapeutics include headache, nausea and additional common protein infusion related events, such as flu-like symptoms, dizziness and
hypertension. The
occurrence of known side effects on a large scale could adversely affect our reputation and public image, and hence
also our operating results.
11
In addition, the use of our
plasma-derived protein therapeutics may be associated with serious and unexpected side effects, or with less serious
reactions at a greater
than expected frequency. This may be especially true when our products are used in critically ill patient populations. When these
unexpected
events are reported to us, we typically make a thorough investigation to determine causality and implications for product safety. These
events
must also be specifically reported to the applicable regulatory authorities, and in some cases, also to the public by media channels.
If our evaluation
concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with one of our products,
we would be obligated to withdraw the
impacted lot or lots of that product or, in certain cases, to withdraw the product entirely. Furthermore,
it is possible that an unexpected side effect caused by
a product could be recognized only after extensive use of the product, which could
expose us to product liability risks, enforcement action by regulatory
authorities and damage to our reputation.
We are subject to several existing laws
and regulations in multiple jurisdictions, non-compliance with which could adversely affect our business,
financial condition and results
of operations, and we are susceptible to a changing regulatory environment, which could increase our compliance costs
or reduce profit
margins.
Any new product must undergo
lengthy and rigorous testing and other extensive, costly, and time-consuming procedures mandated by the FDA
and similar authorities in
other jurisdictions, including the EMA and the regulatory authorities in Israel. Our facilities and those of our contract
manufacturers
must be approved and licensed prior to production and remain subject to inspection from time to time thereafter. Failure to comply with
the
requirements of the FDA or similar authorities in other jurisdictions, including a failed inspection or a failure in our reporting
system for adverse effects of
our products experienced by the users of our products, or any other non-compliance, could result in warning
letters, product recalls or seizures, monetary
sanctions, injunctions to halt the manufacture and distribution of products, civil or criminal
sanctions, import or export restrictions, refusal or delay of a
regulatory authority to grant approvals or licenses, restrictions on operations
or withdrawal of existing approvals and licenses. Furthermore, we may
experience delays or additional costs in obtaining new approvals
or licenses, or extensions of existing approvals and licenses, from a regulatory authority
due to reasons that are beyond our control
such as changes in regulations or a shutdown of the U.S. federal government, including the FDA, or similar
governing bodies or authorities
in other jurisdictions. In addition, while we have established and are in the process of establishing plasma collection centers
in the
United States, we continue to rely on, Kedrion, CSL Behring, Emergent, Takeda and additional plasma suppliers, for plasma collection required
for
the manufacturing of KEDRAB, CYTOGAM, GLASSIA, WINRHO SDF, HEPGAM B and VARIZIG and other Proprietary Products, and in the case of
Kedrion and Takeda, for the distribution of these products in the United States (and in the case of Takeda, commencing in 2024, also in
Canada and
potentially in Australia and New Zealand). In performing such services for us, these plasma suppliers are required to comply
with certain regulatory
requirements. Any failure by these plasma suppliers to properly advise us regarding, or properly perform tasks
related to, regulatory compliance
requirements, could adversely affect us. Any of these actions could cause direct liabilities, a loss
in our ability to market each of KEDRAB, CYTOGAM,
GLASSIA, WINRHO SDF, HEPGAM B and VARIZIG, and/or other Proprietary Products, or a loss
of customer confidence in us or in our Proprietary
Products, which could materially adversely affect our sales, future revenues, reputation,
and results of operations. Similarly, we rely on other third-party
vendors, for example, in the testing, handling, and distributions of
our products. If any of these companies incur enforcement action from regulatory
authorities due to noncompliance, this could negatively
affect product sales, our reputation and results of operations. In addition, we rely on other
distributors of our other Proprietary Products,
for purposes of our distribution-related regulatory compliance for the products they distribute in the
territories in which they operate.
Any failure by such distributors to properly advise us regarding, or properly perform tasks related to, regulatory
compliance requirements,
could adversely affect our sales, future revenues, reputation and results of operations.
Changes in our production
processes for our products may require supplemental submissions or prior approval by the FDA and/or similar
authorities in other jurisdictions.
Failure to comply with any requirements as to production process changes dictated by the FDA or similar authorities in
other jurisdictions
could also result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt the manufacture and distribution
of products, civil or criminal sanctions, refusal or delay of a regulatory authority to grant approvals or licenses, restrictions on operations
or withdrawal of
existing approvals and licenses.
In addition, we rely on Takeda
to share with us any relevant information with respect to changes in the manufacturing of GLASSIA or its usage
which may be applicable
in order to update the products registration file in certain ROW markets in which it is currently registered and/or distributed or
may
be registered and/or distributed in the future.
Furthermore, changes in the
regulation of our activities, such as increased regulation affecting quality or safety requirements or new regulations
such as limitations
on the prices charged to customers in the United States, Israel or other jurisdictions in which we operate, could materially adversely
affect our business. In addition, the requirements of different jurisdictions in which we operate may become less uniform, creating a
greater administrative
burden and generating additional compliance costs, which would have a material adverse effect on our profit margins.
See also – “Regulatory approval for
our products is limited by the FDA, EMA, the IMOH and similar authorities in other
jurisdictions to those specific indications and conditions for which
clinical safety and efficacy have been demonstrated, and the prescription
or promotion of off-label uses could adversely affect our business.”; and “—Laws
and regulations governing the
conduct of international operations may negatively impact our development, manufacture, and sale of products outside of
the United States
and require us to develop and implement costly compliance programs.” and “—Uncertainty surrounding and future
changes to
healthcare law in the United States and other United States Government related mandates may adversely affect our business.”
12
If we experience equipment difficulties
or if the suppliers of our equipment or disposable goods fail to deliver key product components or supplies in a
timely manner, our manufacturing
ability would be impaired, and our product sales could suffer.
For certain equipment and
supplies, we depend on a limited number of companies that supply and maintain our equipment and provide supplies
such as chromatography
resins, filter media, glass bottles and stoppers used in the manufacture of our plasma-derived protein therapeutics. If our equipment
were to malfunction, or if our suppliers stop manufacturing or supplying such machinery, equipment or any key component parts, the repair
or replacement
of the machinery may require substantial time and cost and could disrupt our production and other operations. Alternative
sources for key component parts
or disposable goods may not be immediately available. In addition, any new equipment or change in supplied
materials may require revalidation by us or
review and approval by the FDA, the EMA, the IMOH or other regulatory authorities, which may
be time-consuming and require additional capital and
other resources. We may not be able to find an adequate alternative supplier in a
reasonable time period, or on commercially acceptable terms, if at all. As a
result, shipments of affected products may be limited or
delayed. Our inability to obtain our key source supplies for the manufacture of products may
require us to delay shipments of products,
harm customer relationships and force us to curtail operations.
The nature of producing and developing plasma-derived
protein therapeutics may prevent us from responding in a timely manner to market forces and
effectively managing our production capacity.
The production of plasma-derived
protein therapeutics is a lengthy and complex process. Our ability to match our production of plasma-derived
protein therapeutics to market
demand is imprecise and may result in a failure to meet the market demand for our plasma-derived protein therapeutics or
potentially in
an oversupply of inventory. Failure to meet market demand for our plasma-derived protein therapeutics may result in customers transitioning
to available competitive products, resulting in a loss of segment share or distributor or customer confidence. In the event of an oversupply
in the market, we
may be forced to lower the prices we charge for some of our plasma-derived protein therapeutics, record asset impairment
charges or take other action
which may adversely affect our business, financial condition and results of operations.
We have been required to conduct post-approval
clinical trials of GLASSIA and KEDRAB as a commitment to continuing marketing such products in
the United States, and we may be required
to conduct post-approval clinical trials as a condition to licensing or distributing other products.
When a new product is approved,
the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase 4
clinical trials. For example,
the FDA has required that we conduct Phase 4 clinical trials of GLASSIA and for KEDRAB. Such Phase 4 clinical trials are
aimed at collecting
additional safety data, such as the immune response in the body of a human or animal, commonly referred to as immunogenicity, viral
transmission,
levels of the protein in the lung, or epithelial lining fluid, and certain efficacy endpoints requested by the FDA. If the results of
such trials are
unfavorable and demonstrate a previously undetected risk or provide new information that puts patients at risk, or if
we fail to complete such trials as
instructed by the FDA, this could result in receiving a warning letter from the FDA and the loss of
the approval to market the product in the United States
and other countries, or the imposition of restrictions, such as additional labeling,
with a resulting loss of sales. Furthermore, there can be no assurance that
the FDA will accept the results of any post-marketing commitment
study, such as the results of the KEDRAB study, and under certain circumstances the
FDA may require a subsequent study. Other products
we develop may face similar requirements, which would require additional resources and which may
not be successful. We may also receive
approval that is conditioned on successful additional data or clinical development, and failure in such further
development may require
similar changes to our product label or result in revocation of our marketing authorization.
Risks Related to Our Distribution Segment
Our Distribution segment is dependent on
a few suppliers, and any disruption to our relationship with these suppliers, or their inability to supply us
with the products we sell,
in a timely manner, in adequate quantities and/or at a reasonable cost, would have a material adverse effect on our business,
financial
condition and results of operations.
Sales of products supplied
by Biotest A.G., Kedrion, Chiesi Farmaceutici S.p.A, Bio Products Laboratories (“BPL”) and Valneva SE, which are
sold in our
Distribution segment, together represented approximately 8%, 18% and 20% of our total revenues for the years ended December 31, 2024,
2023
and 2022, respectively. While we have distribution agreements with each of our suppliers, these agreements do not obligate these
suppliers to provide us
with minimum amounts of our Distribution segment products. Purchases of our Distribution segment products from
our suppliers are typically on a
purchase order basis. We work closely with our suppliers to develop annual forecasts, but these forecasts
are not obligations or commitments. However, if
we fail to submit purchase orders that meet our annual forecasts or if we fail to meet
our minimum purchase obligations, we could lose exclusivity or, in
certain cases, the distribution agreement could be terminated.
These suppliers may experience
capacity constraints that result in their being unable to supply us with products in a timely manner, in adequate
quantities and/or at
a reasonable cost. Contributing factors to supplier capacity constraints may include, among other things, industry or customer demands
in excess of machine capacity, labor shortages, changes in raw material flows or shortages in raw materials, which may result from different
market
conditions including, but not limited to, shortages resulting from increased global demand for these raw materials due to global
healthcare issues,
epidemics and pandemics. These suppliers may also choose not to supply us with products at their discretion or raise
prices to a level that would render our
products noncompetitive. Any significant interruption in the supply of these products could result
in us being unable to meet the demands of our customers,
which would have a material adverse effect on our business, financial condition
and results of operations as a result of being required to pay fines or
penalties, be subject to claims of reach of contract, loss of
reputation or even termination of agreement.
13
If our relationship with these
suppliers were to deteriorate, our distribution sales could be adversely affected.
Additionally, our future growth
in the Distribution segment is dependent on our ability to successfully engage other manufacturers for distribution
in Israel of other
products. Failure to engage new suppliers may have an adverse effect on our revenue growth and profitability.
Certain of our sales in our Distribution
segment rely on our ability to win tender bids based on the price and availability of our products in annual
public tender processes.
Certain of our sales in our
Distribution segment rely on our ability to win tender bids during the annual tender process in Israel, as well as on sales
to Health
Maintenance Organizations (HMOs), hospitals and to the IMOH. The prices we can offer, as well as the availability of products, are
key factors in
the tender process. If our suppliers in the Distribution segment cannot sell us products at a competitive price or cannot
guarantee sufficient quantities of
products, we may lose the tenders. In addition, our ability to win bids may be materially adversely
affected by competitive conditions in a bid process.
Existing and new competitors may also have significantly greater financial resources
than us, which they could use to promote their products and business.
Greater financial resources would also enable our competitors to
substantially reduce the price of their products or services. If our competitors are able to
offer prices lower than us, our ability to
win tender bids during the annual tender process will be materially affected and could reduce our total revenues or
decrease our profit
margins.
The challenges we face in
winning tender bids in the Distribution segment are compounded by historical price fluctuations of certain of our
products in the segment
as a result of changes in the production capacity available in the industry, the availability and pricing of plasma, development of
competing
products and the availability of alternative therapies. Higher prices for plasma-derived protein therapeutics have traditionally spurred
increases
in plasma production and collection capacity, resulting over time in increased product supply and lower prices. As demand continues
to grow, if plasma
supply and manufacturing capacity do not commensurately expand, prices tend to increase. Additionally, consolidation
in plasma companies has led to a
decrease in the number of plasma suppliers in the world, as either manufacturers of plasma-based pharmaceuticals
purchase plasma suppliers or plasma
suppliers are shut down in response to the number of manufacturers of plasma-based pharmaceuticals
decreasing, which may lead to increased prices. We
may not be able to pass along these increased plasma and plasma-derivative prices to
our customers, which would reduce our profit margins.
Our Distribution segment is dependent on
a few customers, and any disruption to our relationship with these customers, or our inability to supply, in a
timely manner, in adequate
quantities and/or at a reasonable cost, would have a material adverse effect on our business, financial condition and results
of operations.
The Israeli market for drug
products includes a relatively small number of HMOs and several hospitals. Sales to Clalit Health Services, Israel’s
largest HMO,
accounted for approximately 48%, 34% and 46% of our Distribution segment revenues in the years ended December 31, 2024, 2023 and
2022,
respectively.
If our relationship with any
of our Israeli customers deteriorated, our distribution sales could be adversely affected. Failure to maintain our
existing relationships
with these customers could lead to a decrease in our revenues and profitability.
Before we may sell products in the Distribution
segment, we must register the products with the IMOH and there can be no assurance that such
registration will be obtained.
Before we may sell products
in the Distribution segment in Israel, we must register the products, at our own expense, with the IMOH. We cannot
predict how long the
registration process of the IMOH may take or whether any such registration ultimately will be obtained. The IMOH has substantial
discretion
in the registration process, and we can provide no assurance of success of registration. Our business, financial condition or results
of operations
could be materially adversely affected if we fail to receive IMOH registration for the products in the Distribution segment.
Our Distribution segment is a low-margin
business and our profit margins may be sensitive to various factors, some of which are outside of our
control.
Our Distribution segment is
characterized by high volume sales with relatively low profit margins. Volatility in our pricing may have a direct
impact on our profitability.
Prolonged periods of product cost inflation may have a negative impact on our profit margins and results of operations to the
extent we
are unable to pass on all or a portion of such product cost increases to our customers. In addition, if our product mix changes, we may
face
increased risks of compression of our margins, as we may be unable to achieve the same level of profit margins as we are able to
capture on our existing
products. Our inability to effectively price our products or to reduce our expenses due to volatility in pricing
could have a material adverse impact on our
business, financial condition or results of operations.
14
We may be subject to milestone payments
in connection with our Distribution segment products irrespective of whether the commercialization is
successful.
Certain of our agreements
in the Distribution segment, including agreements for distribution of biosimilar product candidates, require us to make
milestone payments
in advance of product launch. In some cases, we may not be able to obtain reimbursement for such payments. To the extent that we are
not
ultimately able to recoup these payments, our business, financial position and results of operations may be adversely affected.
We face significant competition in our Distribution
segment from companies with greater financial resources.
In the Distribution segment,
we face competition for our distribution products that are marketed in Israel and compete for market share. We
believe that there are
several companies active in the Israeli market distributing the products of several manufacturers whose comparable products compete
with
the products we distribute as part of our Distribution segment. In the plasma area, these manufacturers include Grifols, Takeda and CSL
Behring. In
other specialties and biosimilar products, we compete with products produced by some of the largest pharmaceutical manufacturers
in the world, such as
Novartis AG, AstraZeneca AB, Sanofi and GlaxoSmithKline. Each of these competitors sells its products through a
local subsidiary or a local
representative in Israel. Our existing and new competitors may have significantly greater financial resources
than us, which they could use to promote their
products and business or reduce the price of their products or services. If we are unable
to maintain or increase our market share, we may need to reduce
prices and may suffer reduced profitability or operating losses, which
could have a material adverse impact on our business, financial condition or results of
operations.
In recent years we entered into agreements
for future distribution in Israel of several biosimilar product candidates, and the successful future
distribution of these products,
which is important for the continued growth of the Distribution segment as a whole, is dependent upon several factors
some of which are
beyond our control.
Over the past several years
we entered into agreements with respect to planned distribution in Israel of certain biosimilar product candidates.
Biosimilar products
are highly similar to biological products already licensed for distribution by the FDA, EMA or any other relevant regulatory agency,
notwithstanding
minor differences in clinically inactive components, and that they have no clinically meaningful differences, as compared to the marketed
biological products in terms of the safety, purity and potency of the products. The similar nature of a biosimilar and a reference product
is demonstrated by
comprehensive comparability studies covering quality, biological activity, safety and efficacy.
In order to launch biosimilar
products in Israel, we would need to obtain IMOH marketing authorization, which will be subject to prior
authorization to be obtained
by the manufacturer of the biosimilar product from the FDA or the EMA. Even if an FDA or EMA authorization is provided,
there can be no
assurance that the IMOH will accept such authorization as a reference and will grant us the authorization to distribute such biosimilar
products in the Israeli market. In the event we will not be able to obtain the necessary marking authorization to launch the products,
we may not generate
the expected sale and profitability from these products, which could have a material adverse impact on our business,
financial condition or results of
operations. Delays in the commercialization of such biosimilar products, including due to delays in
obtaining marketing authorization, may expose us to
increased competition, due to the entry of new competitors into the market, which
may adversely impact our potential sales and profitability from these
products.
Innovative pharmaceutical
products are generally protected for a defined period by various patents (including those covering drug substance, drug
product, approved
indications, methods of administration, methods of manufacturing, formulations and dosages) and/or regulatory exclusivity, which are
intended
to provide their holders with exclusive rights to market the products for the life of the patent or duration of the regulatory data protection
period.
Biosimilar products are intended to replace such innovative pharmaceutical products upon the expiration or termination of their
exclusivity period or in
such markets whereby such exclusivity does not exist. The launch of a biosimilar product may potentially result
in the infringement of certain IP rights and
exclusivity and be subject to potential legal proceedings and restraining orders affecting
its potential launch. Such intellectual property threats may
preclude the commercialization of such biosimilar product candidates, limit
the indications for which they can be marketed, and may result in incurring
significant legal expenses and liabilities. Consequently,
we may not generate the expected sale and profitability from these products, which could have a
material adverse impact on our business,
financial condition or results of operations.
In addition, the commercialization
of biosimilars includes the potential for steeper than anticipated price erosion due to increased competitive
intensity, and lower uptake
for biosimilars due to various factors that may vary for different biosimilars (e.g., anti-competitive practices, physician
reluctance
to prescribe biosimilars for existing patients taking the originator product, or misaligned financial incentives), all of which may affect
our
potential sales and profitability from these products which could have a material adverse impact on our business, financial condition
or results of
operations.
15
Risks Related to Development, Regulatory Approval
and Commercialization of Product Candidates
Drug product development, including preclinical
and clinical trials is a lengthy and expensive process and may not result in receipt of regulatory
approval.
Before obtaining regulatory
approval for the sale of our product candidates, including Inhaled AAT for AATD, or for the marketing of existing
products for new indications,
we must conduct, at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in
animals and clinical
trials to demonstrate the safety and efficacy of our product candidates in humans. We cannot predict how long the approval processes
of
the FDA, the EMA, the regulatory authorities in Israel or any other applicable regulatory authority or agency for any of our product candidates
will take
or whether any such approvals ultimately will be granted. The FDA, the EMA, the regulatory authorities in Israel and other regulatory
agencies have
substantial discretion in the relevant drug approval process over which they have authority, and positive results in preclinical
testing or early phases of
clinical studies offer no assurance of success in later phases of the approval process. The approval process
varies from country to country and the
requirements governing the conduct of clinical trials, product manufacturing, product licensing,
pricing and reimbursement vary greatly from country to
country.
Preclinical and clinical testing
is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to its
outcome. A failure of one
or more of our clinical trials can occur at any stage of testing. For example, our Phase 2/3 clinical trial in Europe for Inhaled AAT
for AATD did not meet its primary or secondary endpoints and consequently, in June 2017, we reported on our decision to withdraw the Marketing
Authorization Application (“MAA”) in Europe for our Inhaled AAT for AATD.
Each inhaled formulation of AAT, including
Inhaled AAT for AATD, is being developed with a specific nebulizer produced by PARI, and the
occurrence of an adverse market event or
PARI’s non-compliance with its obligations would have a material adverse effect on the commercialization of
any inhaled formulation
of AAT.
We are dependent upon PARI
GmbH (“PARI”) for the development and commercialization of any inhaled formulation of AAT, including our
Inhaled AAT for AATD.
We have an agreement with PARI, pursuant to which it is required to obtain the appropriate clearance to market PARI’s proprietary
eFlow® device, which is a device required for the administration of inhaled formulation of AAT, from the EMA and FDA for use with
Inhaled AAT for
AATD. See “Item 4B. Information on the Company — Business Overview — Strategic Partnerships —
PARI.” Failure of PARI to achieve these
authorizations, or to maintain operations in regulatory compliance, will have a material
adverse effect on the commercialization of any inhaled formulation
of AAT, including Inhaled AAT for AATD, which would harm our growth
strategy.
Additionally, pursuant to
the agreement, PARI is obligated to manufacture and supply all of the market demand for the eFlow device for use in
conjunction with any
inhaled formulation of AAT and we are required to purchase all of our volume requirements from PARI. Any event that permanently,
or for
an extended period, prevents PARI from supplying the required quantity of devices would have an adverse effect on the commercialization
of any
inhaled formulation of AAT, including Inhaled AAT for AATD.
Lastly, we rely on PARI to
ensure that the eFlow device is not violating or infringing on any third-party intellectual property or patents. PARI’s
inability
to ensure its freedom to operate may have a significant effect on our ability to continue the development of our Inhaled AAT product candidate
as
well as potentially commercializing it.
We rely on third parties to conduct our
preclinical and clinical trials. The failure of these third parties to successfully carry out their contractual duties
or meet expected
deadlines could substantially harm our business because we may not obtain regulatory approval for, or commercialize, our product
candidates
in a timely manner or at all.
We rely upon third-party contractors,
such as university researchers, study sites, preclinical service providers, physicians and contract research
organizations (“CROs”),
to conduct, monitor and manage data for our current and future preclinical and clinical programs. We expect to continue to rely on
these
parties for execution of our preclinical and clinical trials, and we control only certain aspects of their activities. Nevertheless, we
are responsible for
ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and
scientific standards, and our reliance on
such third-party contractors does not relieve us of our regulatory responsibilities. With respect
to clinical trials, we and our CROs are required to comply
with current Good Clinical Practices (“GCP”), which are regulations
and guidelines enforced by the FDA, the EMA and comparable foreign regulatory
authorities for all of our products in clinical development.
Regulatory authorities enforce these GCP through periodic inspections of trial sponsors,
principal investigators and trial sites. If we
or any of our CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be
deemed unreliable and
the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our
marketing
applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that
any of our
clinical trials comply with GCP requirements.
These third-party contractors
are not our employees, we cannot effectively control whether or not they devote sufficient time and resources to our
ongoing clinical,
nonclinical and preclinical programs, and except for remedies available to us under our agreements with such third-party contractors,
we
may be unable to recover losses that result from any inadequate work on such programs. If such third-party contractors do not successfully
carry out their
contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the data they obtain is
compromised due to the failure to adhere
to our clinical protocols, regulatory requirements or for other reasons, our development efforts
and clinical trials may be extended, delayed or terminated
and we may not be able to obtain regulatory approval for or successfully commercialize
our product candidates. As a result, our results of operations and
the commercial prospects for our product candidates would be harmed,
our costs could increase and our ability to generate revenues could be delayed. To
the extent we are unable to successfully identify and
manage the performance of such third-party contractors in the future, our business may be adversely
affected.
16
We have initiated the development of a recombinant
AAT product candidate; however, any continued development of this product will be dependent on
our ability to attract a suitable development/commercialization
partner for this project, and we may not be able to successfully complete its development
or commercialize such product candidate for
numerous reasons.
During 2020, we initiated
the development of a recombinant version of AAT, through external services of a contract development and
manufacturing organization (“CDMO”).
See “Item 4B. Information on the Company — Business Overview— Our Development Product Pipeline —
Recombinant
AAT.” The main advantage of recombinant AAT is its potentially wider availability, and ease of large-scale manufacturing. However,
continued investment in the development of this product will be subject to identifying a suitable development partner, and we may not
be able to identify
such a suitable partner or be successful in entering into an agreement with any particular partner on acceptable terms
or at all. Further, even if we are
successful in entering into an arrangement with such a partner, we may not be able to successfully
develop or commercialize a recombinant product for
numerous reasons.
We may encounter unforeseen events that
delay or prevent us from receiving regulatory approval for our product candidates.
We have experienced unforeseen
events that have delayed our ability to receive regulatory approval for certain of our product candidates, and may
in the future experience
similar or other unforeseen events during, or as a result of, preclinical testing or the clinical trial process that could delay or prevent
our ability to receive regulatory approval or commercialize our product candidates, including the following:
●
delays may occur in obtaining our clinical materials;
●
our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional preclinical testing or clinical trials or to abandon strategic projects;
●
the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower or more
difficult than we anticipate due to various reasons, including challenges that may be imposed as a result of events outside our control (such as
the COVID-19 pandemic, which resulted in a significant slow-down in patient recruitment to our on-going Inhaled AAT Phase 3 study), or
participants may withdraw from our clinical trials at higher rates than we anticipate;
●
delays may occur in reaching agreement on acceptable clinical trial agreement terms with prospective sites or obtaining institutional review
board approval;
●
our strategic partners may not achieve their clinical development goals and/or comply with their relevant regulatory requirements, which
could affect our ability to conduct our clinical trials or obtain marketing authorization;
●
we may be forced to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks or if any
participant experiences an unexpected serious adverse event;
●
regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements;
●
regulators may not authorize us to commence or conduct a clinical trial within a country or at a prospective trial site, or according to the
clinical trial outline we propose;
●
undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by
that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies,
and result in the recall of any approved product distributed pursuant to data determined to be fraudulent;
●
the cost of our clinical and preclinical trials may be greater than we anticipate;
●
an audit of preclinical tests or clinical studies by the FDA, the EMA, the regulatory authorities in Israel or other regulatory authorities may
reveal noncompliance with applicable regulations, which could lead to disqualification of the results of such studies and the need to perform
additional tests and studies; and
●
our product candidates may not achieve the desired clinical benefits, or may cause undesirable side effects, or the product candidates may
have other unexpected characteristics.
If we are required to conduct
additional clinical trials or other testing of our product candidates beyond those that we contemplate, if we are unable
to successfully
complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive,
or if safety
concerns arise, we may:
●
be delayed in obtaining regulatory or marketing approval for our product candidates;
●
be unable to obtain regulatory and marketing approval for our product candidates;
●
decide to halt the clinical trial or other testing;
17
●
be required to conduct additional trials under a conditional approval;
●
be unable to obtain reimbursement for our product candidates in all or some countries;
●
only obtain approval for indications that are not as broad as we initially intend;
●
have the product removed from the market after obtaining marketing approval from the FDA, the EMA, the regulatory authorities in Israel or
other regulatory authorities; and
●
be delayed in, or prevented from, the receipt of clinical milestone payments from our strategic partners.
Our ability to enroll patients
in our clinical trials in sufficient numbers and on a timely basis is subject to several factors, including the size of the
patient population,
the time of year during which the clinical trial is commenced, the hesitance of certain patients to leave their current standard of care
for
a new treatment, and the number of other ongoing clinical trials competing for patients in the same indication and eligibility criteria
for the clinical trial. In
addition, patients may drop out of our clinical trials at any point, which could impair the validity or statistical
significance of the trials. Delays in patient
enrollment or unexpected drop-out rates may result in longer development times.
Our product development costs
will also increase if we experience delays in testing or approvals. There can be no assurance that any preclinical
test or clinical trial
will begin as planned, not need to be restructured or be completed on schedule, if at all. Because we generally apply for patent
protection
for our product candidates during the development stage, significant preclinical or clinical trial delays also could lead to a shorter
patent
protection period during which we may have the exclusive right to commercialize our product candidates, if approved, or could allow
our competitors to
bring products to market before we do, impairing our ability to commercialize our products or product candidates.
Preclinical studies, including
studies of our product candidates in animal models of disease, may not accurately predict the result of human clinical
trials of those
product candidates. In addition, product candidates studied in Phase 1 and 2 clinical trials may be found not to be safe and/or efficacious
when studied further in Phase 3 trials. To satisfy FDA or other applicable regulatory approval standards for the commercial sale of our
product candidates,
we must demonstrate in adequate and controlled clinical trials that our product candidates are safe and effective.
Success in early clinical trials, including
Phase 1 and 2 trials, does not ensure that later clinical trials will be successful. Initial
results from Phase 1 and 2 clinical trials also may not be confirmed by
later analysis or subsequent larger clinical trials. Several companies
in the pharmaceutical industry, including us, have suffered significant setbacks in
advanced clinical trials, even after obtaining promising
results in earlier clinical trials.
We plan to conduct an interim
futility analysis for the InnovAATe clinical study by the end of 2025. Based on the results of the interim futility
analysis we may determine
to terminate the study early, which could negatively impact our business prospects and share price. Even if we will not be
required to
consider termination of the study due to futility, there is no assurance that we will be able to successfully complete the InnovAATe clinical
trial
or that the trial results will be sufficient to obtain FDA and EMA approval.
We may not be able to commercialize our
product candidates in development for numerous reasons.
Even if preclinical and clinical
trials are successful, we still may be unable to commercialize a product because of difficulties in obtaining
regulatory approval for
its production process or problems in scaling that process to commercial production. In addition, the regulatory requirements for
product
approval may not be explicit, may evolve over time and may diverge among jurisdictions and our third-party contractors, such as CROs,
may fail
to comply with regulatory requirements or meet their contractual obligations to us.
Even if we are successful
in our development and regulatory strategies, we cannot provide assurance that any product candidate we may seek to
develop or
are currently developing, such as Inhaled AAT for AATD, will ever be successfully commercialized. We may not be able to successfully address
patient needs, persuade physicians and payors of the benefit of our product, and lead to usage and reimbursement. If such products are
not eventually
commercialized, the significant expense and lack of associated revenue could materially adversely affect our business.
We may not be able to successfully
build and implement a commercial organization or commercialization program, with or without collaborating
partners. The scale-up from
research and development to commercialization requires significant time, resources, and expertise, which will rely, to a large
extent,
on third parties for assistance to help us in our efforts. Such assistance includes, but is not limited to, persuading physicians and
payors of the
benefit of our product to lead to utilization and reimbursement, developing a healthcare compliance program, and complying
with post-marketing
regulatory requirements.
Research and development efforts invested
in our pipeline of specialty and other products may not achieve the expected results.
We must invest increasingly
significant resources to develop specialty products through our own efforts and through collaborations with third
parties in the form
of partnerships or otherwise. The development of specialty pharmaceutical products involves high-level processes and expertise and
carries
a significant risk of failure. For example, the average time from the pre-clinical phase to the commercial launch of a specialty pharmaceutical
product can be 15 years or longer, and involves multiple stages: not only intensive preclinical, clinical and post clinical testing, but
also highly complex,
lengthy, and expensive regulatory approval processes as well as reimbursement proceedings, which can vary from country
to country. The longer it takes to
develop a pharmaceutical product, the longer it may take for us to recover our development costs and
generate profits, and, depending on various factors,
we may not be able to ever recover such costs or generate profits.
18
During each stage of development,
we may encounter obstacles that delay the development process and increase expenses, leading to significant
risks that we will not achieve
our goals and may be forced to abandon a potential product in which we have invested substantial amounts of time and
money. These obstacles
may include the following: shortages in the supply of specialty pharmaceutical products for clinical trials; preclinical-study
failures;
difficulty in enrolling patients in clinical trials; delays in completing formulation and other work needed to support an application
for approval;
adverse reactions or other safety concerns arising during clinical testing; insufficient clinical trial data to support
the safety or efficacy of a product
candidate; other failures to obtain, or delays in obtaining, the required regulatory approvals for
a product candidate or the facilities in which a product
candidate is manufactured; regulatory restrictions which may delay or block market
penetration and the failure to obtain sufficient intellectual property
rights for our products.
Accordingly, there can be
no assurance that the continued development of our Inhaled AAT and any other product candidate will be successful and
will result in an
FDA and/or EMA approvable indication.
Because of the amount of time
and expense required to be invested in augmenting our pipeline of specialty and other products, including the
unique know-how which may
be required for such purpose, we may seek partnerships or joint ventures with third parties from time to time, and
consequently face the
risk that some or all of these third parties may fail to perform their obligations, or that the resulting arrangement may fail to produce
the levels of success that we are relying on to meet our revenue and profit goals.
We may not obtain orphan drug status for
our products, or we may lose orphan drug designations, which would have a material adverse effect on our
business.
One of the incentives provided
by an orphan drug designation is market exclusivity for seven years in the United States and ten years in the
European Union for the first
product in a class approved for the treatment of a rare disease. Although several of our products and product candidates,
including Inhaled
AAT for AATD, have been granted the designation of an orphan drug, we may not be the first product licensed for the treatment of
particular
rare diseases in the future or our approved indication may vary from that subject to the orphan designation, or our products may not secure
orphan drug exclusivity for other reasons. In such cases we would not be able to take advantage of market exclusivity and instead another
sponsor would
receive such exclusivity.
Additionally, although the
marketing exclusivity of an orphan drug would prevent other sponsors from obtaining approval of the same drug
compound for the same indication,
such exclusivity would not apply in the case that a subsequent sponsor could demonstrate clinical superiority or a
market shortage occurs
and would not prevent other sponsors from obtaining approval of the same compound for other indications or the use of other types
of drugs
for the same use as the orphan drug. In the event we are unable to fill demand for any orphan drug, it is possible that the FDA or the
EMA may
view such unmet demand as a market shortage, which could impact our market exclusivity.
The FDA and the EMA may also,
in the future, revisit any orphan drug designation that they have respectively conferred upon a drug and retain
the ability to withdraw
the relevant designation at any time. Additionally, the U.S. Congress has considered, and may consider in the future, legislation that
would restrict the duration or scope of the market exclusivity of an orphan drug, and, thus, we cannot be sure that the benefits to us
of the existing statute in
the United States will remain in effect. Furthermore, some court decisions have raised questions about FDA’s
interpretation of the orphan drug exclusivity
provisions, which could potentially affect our ability to secure orphan drug exclusivity.
If we lose our orphan drug
designations or fail to obtain such designations for our new products and product candidates, our ability to successfully
market our products
could be significantly affected, resulting in a material adverse effect on our business and results of operations.
The commercial success of the products that
we may develop, if any, will depend upon the degree of market acceptance by physicians, patients,
healthcare payors, opinion leaders,
patients’ organizations, and others in the medical community that any such product obtains.
Any products that we bring
to the market may not gain market acceptance by physicians, patients, healthcare payors, opinion leaders, patients’
organizations
and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate material product
revenue and we may not sustain profitability. The degree of market acceptance of our product candidates, if approved for commercial sale,
will depend on a
number of factors, some of which are beyond our control, including:
●
the prevalence and severity of any side effects;
●
the efficacy, potential advantages and timing of introduction to the market of alternative treatments;
●
our ability to offer our product candidates for sale at competitive prices;
●
relative convenience and ease of administration of our products;
●
the willingness of physicians to prescribe our products;
●
the willingness of patients to use our products;
●
the strength of marketing and distribution support; and
●
third-party coverage or reimbursement.
19
If we are not successful in
achieving market acceptance for any new products that we have developed and that have been approved for commercial
sale, we may be unable
to recover the large investment we will have made and have committed ourselves to making in research and development efforts
and our growth
strategy will be adversely affected.
In addition, the proposal
of or issuance of recommendations by government agencies, physician or patient organizations, or other industry
specialists that limit
the use or acceptance of a particular product, whether adopted or not, could result in reduced sales of a product.
Risks Related to Our Operations and Industry
Regulatory approval for our products is
limited by the FDA, EMA, the IMOH and similar authorities in other jurisdictions to those specific indications
and conditions for which
clinical safety and efficacy have been demonstrated, and the prescription or promotion of off-label uses could adversely affect
our business.
Regulatory approval of our
Proprietary Products and Distribution products is limited to those specific diseases and indications for which our
products have been
deemed safe and effective by the FDA, EMA, the IMOH or similar authorities in other jurisdictions. In addition to the regulatory
approval
required for new formulations, any new indication for an approved product also requires regulatory approval. Once we produce a plasma-derived
therapeutic, we rely on physicians to prescribe and administer it as the product label directs and for the indications described on the
labeling. To the extent
off-label uses (i.e., uses and indications not described in the product’s labeling as approved by the applicable
regulatory authority, as may be prescribed by
treating physicians, in their independent medical judgment) become pervasive and produce
results such as reduced efficacy or other reported adverse
effects, the reputation of our products in the marketplace may suffer. In addition,
to the extent off-label uses are associated with reduced efficacy or
increases in reported adverse events or negative health outcomes,
there could be a decline in our revenues or potential revenues. Furthermore, the off-label
use of our products may increase the risk of
product liability claims, which are expensive to defend and could divert our management’s attention, result in
substantial damage
awards against us, and harm our reputation.
Furthermore, while physicians
may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from
those approved
by regulatory authorities, our ability to promote the products is limited to those indications that are specifically approved by the FDA,
EMA, the IMOH or other regulators. Although regulatory authorities generally do not regulate the behavior of physicians, they do restrict
communications
by manufacturers on the subject of off-label use. If our promotional activities fail to comply with these regulations or
guidelines, we may be subject to
warnings from, or enforcement action by, these authorities. In addition, failure to follow FDA, OIG,
EMA, the IMOH or similar authorities in other
jurisdictions rules and guidelines relating to promotion and advertising can lead to other
negative consequences that could hurt us, such as the suspension
or withdrawal of an approved product from the market, enforcement letters,
restrictions on marketing or manufacturing, injunctions and corrective actions.
Other regulatory authorities may separately impose penalties
including, but not limited to, fines, disgorgement of money, suspension of ongoing clinical
trials, refusal to approve pending applications
or supplements to approved applications submitted by us; restrictions on our or our contract manufacturers’
operations; product
seizure or detention, refusal to permit the import or export of products or criminal prosecution.
Regulatory inspections or audits conducted
by regulatory bodies and our partners may lead to monetary losses and inability to adequately manufacture
or sell our products.
The regulatory authorities,
including the FDA, EMA, the IMOH, as well as our partners may, at any time and from time to time, audit or inspect
our facilities. Such
audits or inspections may lead to disruption of work, and if we fail to pass such audits or inspections, the relevant regulatory authority
or partner may require remedial measures that may be costly or time consuming for us to implement and may result in the temporary or permanent
suspension of the manufacture, sale and distribution of our products.
Laws and regulations governing the conduct
of international operations may negatively impact our development, manufacture, and sale of products
outside of the United States and
require us to develop and implement costly compliance programs.
We must comply with numerous
laws and regulations in Israel and in each of the other jurisdictions in which we operate or plan to operate. The
creation and implementation
of any required compliance programs is costly, and the programs are often difficult to enforce, particularly where we must rely
on third
parties.
For example, the U.S. Foreign
Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, authorizing
payment or offering
anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act
or
decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also requires
companies whose
securities are listed in the United States to comply with certain accounting provisions. For example, such companies must
maintain books and records that
accurately and fairly reflect all transactions of the company, including international subsidiaries, and
devise and maintain an adequate system of internal
accounting controls for international operations. The anti-bribery provisions of the
FCPA are enforced primarily by the U.S. Department of Justice, and the
U.S. Securities and Exchange Commission (the “SEC”)
is involved with enforcement of the books and records provisions of the FCPA.
20
Compliance with the FCPA and
similar laws is expensive and difficult, particularly in countries in which corruption is a recognized problem. In
addition, the FCPA
presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and
doctors and other hospital employees are considered as foreign officials. Additionally, pharmaceutical products are usually marketed by
the local
distributors through government tenders, and the majority of pharmaceutical companies’ clients are HMOs which are foreign
government officials under
the FCPA. Certain payments to hospitals in connection with clinical trials and other work, and certain payments
to HMOs have been deemed to be
improper payments to government officials and have led to FCPA enforcement actions.
The failure to comply with
laws governing international business practices may result in substantial penalties, including suspension or debarment
from government
contracts. Violation of the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to
suspension
of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can
result in
long-term disqualification as a government contractor. The termination of a government contract or relationship as a result
of our failure to satisfy any of
our obligations under laws governing international business practices would have a negative impact on
our operations and harm our reputation and ability
to procure government contracts. Additionally, the SEC also may suspend or bar issuers
from trading securities on U.S. exchanges for violations of the
FCPA’s accounting provisions.
If our manufacturing facility in Beit Kama,
Israel were to suffer a serious accident, contamination, force majeure event (including, but not limited to, a
war, terrorist attack,
earthquake, major fire or explosion etc.) materially affecting our ability to operate and produce saleable plasma-derived protein
therapeutics,
all of our manufacturing capacity could be shut down for an extended period.
We rely on a single manufacturing
facility in Beit Kama, which is located in southern Israel, approximately 20 miles east of the Gaza Strip. A
significant part of our revenues
in our Proprietary Products segment were derived and are expected to continue to be derived from products manufactured at
this facility
and some of the products that are imported by us under our Distribution segment are packed and stored in this manufacturing facility.
If this
facility were to suffer an accident or a force majeure event, such as war (including the current war between Israel and Hamas),
terrorist attack, earthquake,
major fire or explosion, major equipment failure or power failure lasting beyond the capabilities of our
backup generators or similar event, or
contamination, our revenues would be materially adversely affected. For more information regarding
the current security situation in Israel, see – Risks
Relating to Our Incorporation and Location in Israel – “Our
business could be adversely affected by political, economic and military instability in Israel
and its region”. In such a situation,
our manufacturing capacity could be shut down for an extended period, we could experience a loss of raw materials,
work in process or
finished goods and imported products inventory and our ability to operate our business would be harmed. In addition, in any such event,
the reconstruction of our manufacturing facility and storage facilities, and the regulatory approval of the new facilities could be time-consuming.
During
this period, we would be unable to manufacture our plasma-derived protein therapeutics.
Our insurance against property
damage and business interruption insurance may be insufficient to mitigate the losses from any such accident or
force majeure event. We
may also be unable to recover the value of the lost plasma or work-in-process inventories, as well as the sales opportunities from
the
products we would be unable to produce or distribute, or the loss of customers during such period.
If our shipping or distribution channels
were to become inaccessible due to an accident, act of terrorism, strike, epidemic or pandemic or any other
force majeure event, our supply,
production and distribution processes could be disrupted.
Most of our Proprietary Products
and Distribution products as well as most of the raw materials we utilize, including plasma and plasma
derivatives, must be transported
under controlled temperature conditions, including temperature of -20 degrees Celsius (-4 degrees Fahrenheit), to ensure
the preservation
of their proteins. Not all shipping or distribution channels are equipped to transport products or materials at these temperatures. If
any of
our shipping or distribution channels become inaccessible because of a serious accident, act of terrorism, strike, epidemic or
pandemic (such as the
COVID-19 pandemic) or any other force majeure event, we may experience disruptions in continued availability of
plasma and other raw materials, delays
in our production process or a reduction in our ability to distribute our Proprietary Products
and Distribution products to our customers in the markets in
which we operate.
Failure to maintain the security of protected
health information or compliance with security requirements could damage our reputation with
customers, cause us to incur substantial
additional costs and become subject to litigation.
Pursuant to applicable privacy
laws, we must comply with comprehensive privacy and security standards with respect to the use and disclosure of
protected health information
and other personal information. If we do not comply with existing or new laws and regulations related to protecting privacy
and security
of personal or health information, we could be subject to litigation costs and damages, monetary fines, civil penalties, or criminal sanctions.
We may be required to comply with the data privacy and security laws of other countries in which we operate or from which we receive data
transfers.
For example, the General Data
Protection Regulation (“GDPR”) which took effect May 25, 2018, has broad application and enhanced penalties for
noncompliance.
The GDPR, which is wide-ranging in scope, governs the collection and use of personal data in the European Union and imposes
operational
requirements for companies that receive or process personal data of residents of the European Union. The GDPR may apply to our clinical
development operations. In addition, the Israeli Privacy Protection Regulations (Information Security), 2017, which apply to our operations
in Israel,
require us to take certain security measures to secure the processing of personal data, and pursuant to a recent amendment,
commencing as of August 2025,
we could be subject to sanctions for non-compliance with the requirements of Israeli privacy laws and regulations.
Furthermore, U.S. federal and state
regulators continue to adopt new, or modify existing laws and regulations addressing data privacy
and the collection, processing, storage, transfer and use
of data, including the U.S. Health Insurance Portability and Accountability
Act of 1996, as amended, and implementing regulations (“HIPAA”). These
privacy, security and data protection laws and regulations
could impose increased business operational costs, require changes to our business, require
notification to customers or workers of a
security breach, or restrict our use or storage of personal information. Our efforts to implement programs and
controls that comply with
applicable data protection requirements are likely to impose additional costs on us, and we cannot predict whether the
interpretations
of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements, could have a
material
adverse effect on our business.
21
We rely upon our CROs, third
party contractors and distributors to process personal information on our behalf, and we control only certain aspects
of their activities.
Nevertheless, we are responsible for ensuring that their activities are conducted in accordance with privacy regulations and our reliance
on such CROs, third-party contractors and distributors does not relieve us of our regulatory responsibilities. While we take reasonable
and prudent steps to
protect personal and health information and use such information in accordance with applicable privacy laws, a compromise
in our security systems that
results in personal information being obtained by unauthorized persons or our failure to comply with security
requirements for financial transactions could
adversely affect our reputation with our clients and result in litigation against us or
the imposition of penalties, all of which may adversely impact our
results of operations, financial condition and liquidity. In addition,
given that the privacy laws and regulations in the jurisdictions in which we operate are
new and subject to further judicial review and
interpretation, it may be determined at a future time that although we take prudent measures to comply with
such laws and regulations,
such measures will not be sufficient to meet future elaborations or interpretations of such laws and regulations.
If we are unable to successfully introduce
new products and indications or fail to keep pace with advances in technology, our business, financial
condition and results of operations
may be adversely affected.
Our continued growth depends,
to a certain extent, on our ability to develop and obtain regulatory approvals of new products, new enhancements
and/or new indications
for our products and product candidates. Obtaining regulatory approval in any jurisdiction, including from the FDA, EMA or any
other relevant
regulatory agencies involves significant uncertainty and may be time consuming and require significant expenditures. See “—Research
and
development efforts invested in our pipeline of specialty and other products may not achieve expected results.”
The development of innovative
products and technologies that improve efficacy, safety, patients’ and clinicians’ ease of use and cost-effectiveness,
involve
significant technical and business risks. The success of new product offerings will depend on many factors, including our ability to properly
anticipate and satisfy customer needs, adapt to new technologies, obtain regulatory approvals on a timely basis, demonstrate satisfactory
clinical results,
manufacture products in an economic and timely manner, engage qualified distributors for different territories and establish
our sales force to sell our
products, and differentiate our products from those of our competitors. If we cannot successfully introduce
new products, adapt to changing technologies or
anticipate changes in our current and potential customers’ requirements, our products
may become obsolete, and our business could suffer.
Product liability claims or product recalls
involving our products, or products we distribute, could have a material adverse effect on our business.
Our business exposes us to
the risk of product liability claims that are inherent in the manufacturing, distribution and sale of our Proprietary
Products and Distribution
products and other drug products. We face an inherent risk of product liability exposure related to the testing of our product
candidates
in human clinical trials and an even greater risk when we commercially sell any products, including those manufactured by others that
we
distribute in Israel. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries,
or if the indemnities
we have negotiated do not adequately cover losses, we could incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may
result in:
●
decreased demand for our Proprietary and Distribution products and any product candidates that we may develop;
●
injury to our reputation;
●
difficulties in recruiting new participants to our future clinical trials and withdrawal of current clinical trial participants;
●
costs to defend the related litigation;
●
substantial monetary awards to trial participants or patients;
●
difficulties in finding distributors for our products;
22
●
difficulties in entering into strategic partnerships with third parties;
●
diversion of management’s attention;
●
loss of revenue;
●
the inability to commercialize any products that we may develop; and
●
higher insurance premiums.
Plasma is biological matter
that is capable of transmitting viruses, infections and pathogens, whether known or unknown. Therefore, plasma
derivative products, if
not properly tested, inactivated, processed, manufactured, stored and transported, could cause serious disease and possibly death to
the
patient. Further, even when such steps are properly affected, viral and other infections may escape detection using current testing methods
and may not
be susceptible to inactivation methods. Any transmission of disease using one of our products or third-party products sold
by us could result in claims
against us by or on behalf of persons allegedly infected by such products.
In addition, we sell and distribute
third-party products in Israel, and the laws of Israel could also expose us to product liability claims for those
products. Furthermore,
the presence of a defect (or a suspicion of a defect) in a product could require us to carry out a recall of such product. A product
liability
claim, or a product recall could result in substantial financial losses, negative reputational repercussions, loss of business and an
inability to retain
customers. Although we maintain insurance for certain types of losses, claims made against our insurance policies
could exceed our limits of coverage or
be outside our scope of coverage. Additionally, as product liability insurance is expensive and
can be difficult to obtain, a product liability claim could
increase our required premiums or otherwise decrease our access to product
liability insurance on acceptable terms. In turn, we may not be able to maintain
insurance coverage at a reasonable cost and may not be
able to obtain insurance coverage that will be adequate to satisfy liabilities that may arise.
Uncertainty surrounding and future changes
to healthcare law in the United States and other United States Government related mandates may
adversely affect our business.
In the U.S. and in some foreign
jurisdictions there has been, and continues to be, significant legislative and regulatory changes and proposed
changes regarding the healthcare
system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities,
and affect
the profitable sale of product candidates. This legislation and regulatory activity have created uncertainty as to whether the industry
will continue
to experience fundamental change as a result of regulatory reform or legislative reform. There is significant interest among
legislators and regulators in
promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving
quality and/or expanding access. In the United
States, for example, the pharmaceutical industry has been a particular focus of these efforts
and has been significantly affected and continues to face major
uncertainty due to the status of legislative initiatives surrounding healthcare
reform. The Patient Protection and Affordable Care Act of 2010, as amended
by the Healthcare and Education Reconciliation Act of 2010,
substantially changed the way healthcare is financed by both governmental and private
insurers, and significantly affected the pharmaceutical
and healthcare industries. On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was
signed into law. The IRA includes
several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal
government. Implementation
of novel and seminal provisions in the IRA related to prescription drug pricing and spending will continue over the next
several years
and could impact our operations and could have an adverse impact on our ability to generate revenues in the United States.
In the coming years, additional
changes could be made to U.S. governmental healthcare programs and U.S. healthcare laws that could significantly
impact the success of
our products.
In addition, individual states
have enacted drug price transparency laws that may impact our decision-making about price increases, including the
rate and frequency
of such increases. The requirements under these laws vary state-by-state and include obligating manufacturers to provide advance notice
of planned price increases, increase amounts and factors considered for those amounts, wholesale acquisition costs, as well as additional
information for
new drugs. Many states may impose penalties for noncompliance with these requirements, including for failure to report
or submission of inaccurate or late
reports.
We cannot predict what other
legislation relating to our business or to the health care industry may be enacted, or what effect such legislation or
other regulatory
actions may have on our business, prospects, operating results and financial condition.
The COVID-19 pandemic shined
a spotlight on the supply chain for essential medical products, medical countermeasures, and critical inputs to
those products and raised
legislative and regulatory interest in creating more resiliency in the supply chain, including more domestic manufacturing of
essential
medical products, medical countermeasures, and critical inputs. There has been significant congressional interest in oversight of pharmaceutical
supply chain resiliency as well as several legislative proposals to create incentives for domestic manufacturing. There has also been
significant executive
branch activity to encourage American manufacturing, which may impact FDA-related products. In November 2023, President
Biden announced a new
White House Council on Supply Chain Resilience to advance a government-wide strategy to build supply chain resilience
in critical industries such as
essential medical products and countermeasures. As part of that effort, on December 27, 2023, President
Biden issued a Presidential Determination under
the Defense Production Act (DPA) to enable the Department of Health and Human Services
to increase investment in domestic manufacturing of essential
medicines, medical countermeasures, and critical inputs deemed as essential
to the national defense. In addition, we expect there will continue to be
legislative and regulatory efforts to increase domestic
manufacturing, including potentially efforts to expedite drug approvals for products that could be
competitors to ours. We cannot predict
what effect such legislation or regulatory actions, or implementation of the supply chain resiliency measures and
DPA authorities, may
have on our business, prospects, operating results and financial condition.
23
Our products and any future approved products
remain subject to extensive ongoing regulatory obligations and oversight, including post-approval
requirements, that could result in penalties
and significant additional expenses and could negatively impact our and our collaborators’ ability to
commercialize our current
and any future approved products.
Any product that has received
regulatory approval remains subject to extensive ongoing obligations and continued review from applicable
regulatory agencies. These obligations
include, among other things, drug safety reporting and surveillance, submission of other post-marketing information
and reports, pre-clearance
of certain promotional materials, manufacturing processes and practices, product labeling, confirmatory or post-approval clinical
research,
import and export requirements and record keeping. These obligations may result in significant expense and limit our ability to commercialize
our
current and any future approved products. Any violation of ongoing regulatory obligations could result in restrictions on the applicable
product, including
the withdrawal of the applicable product from the market.
If FDA approval is granted
via the accelerated approval pathway or a product receives conditional marketing authorization from another
comparable regulatory agency,
we may be required to conduct a post-marketing confirmatory trial in support of full approval and to comply with other
additional requirements.
An unsuccessful post-marketing study or failure to complete such a study with due diligence could result in the withdrawal of
marketing
approval. Post-marketing studies may also suggest unfavorable safety information that could require us to update the product’s prescribing
information or limit or prevent the product’s widespread use. Recent legislation has given the FDA additional authority to require
accountability and
enforce the post-marketing requirements and commitments associated with accelerated approval.
We and the manufacturers of
our current and any future approved products are also required, or will be required, to comply with cGMP,
regulations, which include requirements
relating to quality control and quality assurance as well as the corresponding maintenance of records and
documentation. Further, regulatory
agencies must approve these manufacturing facilities before they can be used to manufacture our products and product
candidates, and these
facilities are subject to ongoing regulatory inspections. In addition, any approved product, its manufacturer and the manufacturer’s
facilities are subject to continual regulatory review and inspections, including periodic unannounced inspections. Failure to comply with
applicable FDA
and other regulatory requirements may subject us to administrative or judicially imposed sanctions and other consequences,
including:
●
issuance of Form FDA 483 notices or Warning Letters by the FDA or other regulatory agencies;
●
imposition of fines and other civil penalties;
●
criminal prosecutions;
●
injunctions, suspensions or revocations of regulatory approvals;
●
suspension of any ongoing clinical trials;
●
total or partial suspension of manufacturing;
●
delays in regulatory approvals and commercialization;
●
refusal by the FDA to approve pending applications or supplements to approved applications submitted by us;
●
refusals to permit drugs to be imported into or exported from the United States;
●
restrictions on operations, including costly new manufacturing requirements;
●
product recalls or seizures or withdrawal of the affected product from the market; and
●
reputational harm.
The policies of the FDA and
other regulatory agencies may change, and additional laws and regulations may be enacted that could prevent or
delay regulatory approval
of our product candidates or of our products in any additional indications or territories, or further restrict or regulate post-
approval
activities. Any problems with a product or any violation of ongoing regulatory obligations could result in restrictions on the applicable
product,
including the withdrawal of the applicable product from the market. If we are not able to maintain regulatory compliance, we
might not be permitted to
commercialize our current or any future approved products and our business would suffer.
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Laws pertaining to health care fraud and
abuse could materially adversely affect our business, financial condition and results of operations.
The laws governing our conduct
in the United States are enforceable by criminal, civil, and administrative penalties. Violations of laws such as the
Federal False Claims
Act (the “FCA”), the Physician Payments Sunshine Act or a provision of the U.S. Social Security Act known as the “federal
Anti-
Kickback Statute,” or any regulations promulgated under their authority may result in jail sentences, fines or exclusion from
federal and state health care
programs, as may be determined by the Department of Health and Human Services, the Department of Defense,
other federal and state regulatory
authorities and the federal and state courts. There can be no assurance that our activities will not
come under the scrutiny of regulators and other
government authorities or that our practices will not be found to violate applicable laws,
rules and regulations or prompt lawsuits by private citizen
“relators” under federal or state false claims laws.
For example, under the federal
Anti-Kickback Statute, and similar state laws and regulations, even common business arrangements, such as
discounted terms and volume
incentives for customers in a position to recommend or choose drugs and devices for patients, such as physicians and
hospitals, can result
in substantial legal penalties, including, among others, exclusion from Medicare and Medicaid programs, if those business
arrangements
are not appropriately structured. Also, a person or company need not have actual knowledge of statute or specific intent to violate certain
such laws in order to have committed a violation. Therefore, our arrangements with potential referral sources must be structured with
care to comply with
applicable requirements. Also, certain business practices, such as payment of consulting fees to healthcare providers,
sponsorship of educational or research
grants, charitable donations, interactions with healthcare providers that prescribe products for
uses not approved by the FDA and financial support for
continuing medical education programs, must be conducted within narrowly prescribed
and controlled limits to avoid the possibility of wrongfully
influencing healthcare providers to prescribe or purchase particular products
or as a reward for past prescribing. Manufacturers like us can be held liable
under the False Claims Act if they are determined to have
caused the submission of false or fraudulent claims to the government for reimbursement. This
can result from prohibited activities such
as off-label marketing, providing inaccurate billing or coding information to healthcare providers and other
customers, or violations
of the federal Anti-Kickback Statute Significant enforcement activity has been the result of actions brought by relators, who file
complaints
in the name of the United States (and if applicable, particular states) under federal and state False Claims Act statutes and can be entitled
to
receive a significant portion (often as great as 30%) of total recoveries. Also, violations of the False Claims Act can result in treble
damages, and each false
claim submitted can be subject to a penalty of up to $27,018 per claim. Transfers of value to certain healthcare
practitioners and institutions must be tracked
and reported in accordance with the Physician Payments Sunshine Act and various state laws.
The Physician Payments Sunshine Act imposes reporting and
disclosure requirements for pharmaceutical and medical device manufacturers
with regard to a broad range of payments, ownership interests, and other
transfers of value made to certain physicians, physician assistants,
nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists,
certified nurse-midwives and certain teaching
hospitals. A number of states have similar laws in place and often require reporting for other categories of
healthcare professionals,
such as nurses. Additional and stricter prohibitions could be implemented by federal and state authorities. Where practices have
been
found to involve improper incentives to use products, government investigations and assessments of penalties against manufacturers have
resulted in
substantial damages and fines. Many manufacturers have been required to enter into consent decrees, corporate integrity agreements,
or orders that
prescribe allowable corporate conduct. Failure to satisfy requirements under the FDCA can also result in penalties, as
well as requirements to enter into
consent decrees or orders that prescribe allowable corporate conduct. On November 16, 2020, the U.S.
Health and Human Services (HHS) Office of
Inspector General (OIG) issued a Special Fraud Alert discussing the fraud and abuse risks associated
with payments to physicians related to speaker
programs sponsored by pharmaceutical and medical device companies. OIG expressed skepticism
regarding the educational value of these industry-
sponsored speaker programs and warned of the inherent fraud and abuse risks of these
programs.
To market and sell our products
outside the United States, we must obtain and maintain regulatory approvals and comply with regulatory
requirements in such jurisdictions.
The approval procedures vary among countries in complexity and timing. We may not obtain approvals from regulatory
authorities outside
the United States on a timely basis, if at all, and in such case, we would be precluded from commercializing products in those markets.
In addition, some countries, particularly the countries of the European Union, regulate the pricing of prescription pharmaceuticals. In
these countries,
pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval
for a product. To obtain reimbursement
or pricing approval in some countries, we may be required to conduct a clinical trial that compares
the cost-effectiveness of our product candidate to other
available therapies. Such trials may be time-consuming and expensive and may
not show an advantage in cost-efficacy for our products. If reimbursement
of our products is unavailable or limited in scope or amount,
or if pricing is set at unsatisfactory levels, in either the United States or the European Union,
we could be adversely affected. Also,
under the FCPA, the United States has regulated conduct by U.S. businesses occurring outside of the United States,
generally prohibiting
remuneration to foreign officials for the purpose of obtaining or retaining business. Additionally, similar to the Physician Payments
Sunshine Act, there are legal and regulatory obligations outside the United States that include reporting requirements detailing interactions
with and
payments to healthcare practitioners. See — General Risks – “We are subject to risks associated with doing
business globally”.
25
To enhance compliance with
applicable health care laws, and mitigate potential liability in the event of noncompliance, regulatory authorities,
such as the HHS OIG,
have recommended the adoption and implementation of a comprehensive health care compliance program that generally contains the
elements
of an effective compliance and ethics program described in Section 8B2.1 of the U.S. Sentencing Commission Guidelines Manual. Increasing
numbers of U.S.-based pharmaceutical companies have such programs. We have adopted U.S. healthcare compliance and ethics programs that
generally
incorporate the HHS OIG’s recommendations; however, there can be no assurance that following the adoption of such programs
we will avoid any
compliance issues.
In addition to the federal
fraud, waste, and abuse laws noted, there are analogous U.S. state laws and regulations, such as state anti-kickback and
false claims
laws, and other state laws addressing the medical product and healthcare industries, which may apply to items or services reimbursed by
any
third-party payor, including commercial insurers, and in some cases may apply regardless of payor (i.e., even if reimbursement is
not available). Some state
laws are constructed in accordance with certain industry voluntary compliance guidelines (e.g., the PhRMA or
AdvaMed Codes of Ethics), or the relevant
compliance program guidance promulgated by the federal government (HHS-OIG) in addition to other
requirements, many of which differ from each other
in significant ways and may not have the same effect, thus complicating compliance
efforts.
Compliance efforts related
to such laws are costly, and failure to comply could subject us to enforcement action.
Finally, regulations in both
the U.S. and other countries are subject to constant change. There can be no assurance that we can meet the
requirements of future regulations
or that compliance with current regulations assures future capability to distribute and sell our products.
We could be adversely affected if other
government or private third-party payors decrease or otherwise limit the amount, price, scope or other eligibility
requirements for reimbursement
for the purchasers of our products.
Prices in many of our principal
markets are subject to local regulation and certain pharmaceutical products, such as our Proprietary and
Distribution products, are subject
to price controls. In the United States, where reimbursement levels for our products are substantially established by third-
party payors,
a reduction in the payors’ amount of reimbursement for a product may cause groups or individuals dispensing the product to discontinue
administration of the product, to administer lower doses, to substitute lower cost products or to seek additional price-related concessions.
These actions
could have a negative effect on our financial results, particularly in cases where our products command a premium price
in the marketplace or where
changes in reimbursement rates induce a shift in the site of treatment. The existence of direct and indirect
price controls and pressures over our products has
affected, and may continue to materially adversely affect, our ability to maintain
or increase gross margins.
Also, the intended use of
a drug product by a physician can affect pricing. Physicians frequently prescribe legally available therapies for uses that
are not described
in the product’s labeling and that differ from those tested in clinical studies and approved by the FDA or similar regulatory authorities
in
other countries. These off-label uses are common across medical specialties, and physicians may believe such off-label uses constitute
the preferred
treatment or treatment of last resort for many patients in varied circumstances. Reimbursement for such off-label uses may
not be allowed by government
payors. If reimbursement for off-label uses of products is not allowed by Medicare or other third-party payors,
including those in the United States or the
European Union, we could be adversely affected. For example, Centers for Medicare and Medicaid
(“CMS”) could initiate an administrative procedure
known as a National Coverage Determination (“NCD”), by which
the agency determines which uses of a therapeutic product would be reimbursable under
Medicare and which uses would not. This determination
process can be lengthy, thereby creating a long period during which the future reimbursement for a
particular product may be uncertain.
If we fail to comply with our obligations
under U.S. governmental pricing programs, we could be required to reimburse government programs for
underpayments and could pay penalties,
sanctions, and fines.
In the United States, pricing
and reimbursement for our products depend in part on government regulation. Any significant efforts at the federal or
state levels to
reform the healthcare system by changing the way healthcare is provided or funded or more directly impose controls on drug pricing,
government
reimbursement, and access to medicines on public and private insurance plans could have a material impact on us. In addition, in order
to have
our products covered by Medicaid, we must offer discounts or rebates on purchases of pharmaceutical products under various federal
and state programs.
We also must report specific prices to government agencies. The calculations necessary to determine the prices reported
are complex and the failure to do
so accurately may expose us to enforcement measures that could negatively affect our results.
Changes to the Medicaid program
or the federal 340B drug pricing program, which imposes ceilings on prices that drug manufacturers can charge
for medications sold to
certain health care facilities, could have a material impact on our business. Additional changes to the 340B program are undergoing
review
and their status is unclear. The Department of Health and Human Services (HHS) has sent letters to numerous manufacturers that have implemented
contract pharmacy integrity initiatives expressing the view that their programs are in violation of the 340B statute and referring those
programs for potential
enforcement action. Several manufacturers have challenged HHS’s enforcement letters in federal court and
litigation is ongoing in those cases. We believe
that our program is consistent with the statute. Additional legal or legislative developments
at the federal or state level with respect to the 340B program
may have an adverse impact on our integrity initiative, and we may face
enforcement action or penalties that could negatively impact our results, depending
upon such developments.
26
We are subject to extensive environmental,
health and safety, and other laws and regulations.
Our business involves the
controlled use of hazardous materials, various biological compounds and chemicals. The risk of accidental
contamination or injury from
these materials cannot be eliminated. If an accident, spill or release of any regulated chemicals or substances occurs, we could
be held
liable for resulting damages, including for investigation, remediation and monitoring of the contamination, including natural resource
damages, the
costs of which could be substantial. In addition, some of the license and permits granted to us may be suspended or revoked,
resulting in our inability to
conduct our regular business activity, manufacture and/or distribute our products for an extended period
of time or until we take remedial actions. We are
also subject to numerous environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials and chemicals.
Although we maintain workers’ compensation insurance to cover the
costs and expenses that may be incurred because of injuries to
our employees resulting from the use of these materials, this insurance may not provide
adequate coverage against potential liabilities.
Additional or more stringent federal, state, local or foreign laws and regulations affecting our operations may
be adopted in the future.
We may incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any of these
or certain
other laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including costs
to install
new or updated pollution control equipment, modify our operations or perform other corrective actions at our respective facilities.
In addition, fines and
penalties may be imposed for noncompliance with environmental, health and safety and other laws and regulations
or for the failure to have, or comply
with the terms and conditions of, required environmental or other permits or consents. We are subject
to future audits by the Environmental Health
Department of the Regional Health Bureau of the IMOH and the Ministry of Environmental Protection
of Israel and may be required to perform certain
actions from time to time in order to comply with these guidelines and their requirements.
We do not expect the costs of complying with these guidelines to
be material to our business. See “Item 4. Information on the Company
— Business Overview — Environmental.”
Under the Israeli Economic
Competition Law, 5758-1988, as amended (the “Competition Law”), a company that supplies or acquires more than
50% of any product
or service in Israel in a relevant market may be deemed to be a monopoly. In addition, any company that has “significant market
power” (within the meaning of the Competition Law), even if it does not hold market share that is greater than 50%, shall be deemed
to be a monopolist
under the Competition Law. A monopolist is prohibited from participating in certain business practices, including unreasonably
refusing to sell products or
provide services over which a monopoly exists, charging unfair prices for such products or services, and
abusing its position in the market in a manner that
might reduce business competition or harm the public. In addition, the General Director
of the Israeli Competition Authority may determine that a company
is a monopoly and has the right to order such company to change its
conduct in matters that may adversely affect business competition or the public,
including by imposing restrictions on its conduct. Depending
on the analysis and the definition of the different products we distribute in the markets in
which we operate, we may be deemed to be
a “monopoly” under the Competition Law with respect to certain of our products. Furthermore, following an
amendment to the
Competition Law that became effective in August 2015, which repealed the statutory exemption that existed under the Competition Law
for
restrictive arrangements that were mutually exclusive arrangements, we may face difficulties in certain cases negotiating distribution
agreements with
foreign pharmaceutical manufacturers.
We have entered into a collective bargaining
agreement with the employees’ committee and the Histadrut (General Federation of Labor in Israel), and
we have incurred and could
in the future incur labor costs or experience work stoppages or labor strikes as a result of any disputes in connection with
such agreement.
In December 2013, we signed
a collective bargaining agreement with the employees’ committee established by our employees at our Beit Kama
production facility
in Israel and the Histadrut (General Federation of Labor in Israel) (“Histadrut”), which expired in December 2017. In November
2018,
we signed a further collective bargaining agreement with the employees’ committee and the Histadrut, which expired in December
2021. In July 2022, we
signed a new collective agreement with the Histadrut; while the agreement will be effective through the end of
2029, certain economic terms may be
renegotiated by the parties following the lapse of the four-year anniversary of the agreement by January
1, 2026. We have experienced labor disputes and
work stoppages in the past at our Beit Kama facility. For example, on March 3, 2022, during
our negotiations with the Histadrut and the employees’
committee on the renewal of the collective bargaining agreement, the employee’s
committee declared a labor dispute, and on April 26, 2022, a strike was
initiated by the employee’s committee, which continued until
the new agreement was signed in July 2022. As a result of the labor strike, in the year ended
December 31, 2022, our gross profit was
impacted by a $4.3 million loss associated with the effect of the work-stoppage at the Israeli plant. In addition, in
December 2020, during
the course of our negotiations with the Histadrut and the employees’ committee on severance remuneration for employees who
may be
laid-off as part of the workforce down-sizing as a result of the transfer of GLASSIA manufacturing to Takeda that we implemented during
2021,
the employee’s committee declared a labor dispute, which was subsequently concluded during February 2021 following the execution
of a special
collective bargaining agreement governing such severance terms. In March 2023, we entered into an additional special collective
bargaining agreement
with the employees’ committee and the Histadtrut governing severance remuneration terms for employees who may
be laid-off in connection with the
potential staff reductions, when needed, in order to adjust to lower plant utilization. Any future
disputes with the employees’ committee and the Histadrut
over the implementation or the interpretation or the renewal of the collective
bargaining agreement may lead to additional labor costs and/or work
stoppages, which could adversely affect our business operations, including
through a loss of revenue and strained relationships with customers.
27
Following the establishment of our U.S.
commercial operations through our subsidiaries Kamada Inc. and Kamada Plasma LLC, we have entered into
intercompany agreements for the
transfer of products, which require us to meet transfer pricing requirements under both Israeli and U.S. tax
legislation.
Following the establishment
of our U.S. commercial operations through our subsidiaries Kamada Inc. and Kamada Plasma LLC, we have entered
into intercompany agreements
for the transfer of products. Our intercompany agreements for the sale of products or provision of services are required to be
made on
an arms-length basis and must comply with transfer pricing provisions of tax laws in Israel and the U.S. In order to determine the adequate
transfer pricing arrangement, we are required to perform a transfer pricing study to compare the contemplated intercompany transaction
with similar
transactions entered into amongst non-related parties. There can be no assurance that the Israeli and/or tax authorities
would accept such transfer pricing
study when determining our, or any of our subsidiary’s income, profitability and tax assessment.
Failure to comply with transfer pricing rules may result in
increased tax expenses, penalties and legal actions against us, our subsidiaries
or our executive officer.
We may be exposed to tax reporting requirements
and tax expense in multiple jurisdictions in which our products are being distributed.
We are incorporated under
the laws of the State of Israel and some of our subsidiaries are organized under the laws of Delaware and Ireland and as
a result, we
are subject to local tax requirements and potential tax expenses in these territories. We store, distribute and sell our Proprietary products
in
multiple other countries in which we do not have any subsidiaries or physical presence; nevertheless, in some of these countries, pursuant
to local
legislation, we may be considered as “conducting business activities” which may expose us to certain reporting requirements
and potential direct or indirect
tax payments. Failure to comply with such local legislation may result in increased tax expenses, penalties
and legal action against us, our subsidiaries or
our executive officers.
Increasing use of artificial intelligence
and new technologies could give rise to liability, breaches of data security, or reputational damage.
We and our employees increasingly
utilize artificial intelligence (“AI”) tools to support various business functions. While these tools offer
efficiencies,
they may also result in potential inaccuracies and miscommunications leading to misunderstandings with stakeholders, such as customers
and
regulatory entities.
Furthermore, the use of AI
solutions by our employees or third parties on which we rely, may lead to the public disclosure of confidential
information (including
personal data and proprietary information) in contravention of our internal policies, data protection laws, or contractual
requirements.
In the future, we may consider
the use of additional AI tools for various aspects of our business. While these advancements could provide
significant benefits, they
also present new risks. The integration of new AI technologies could lead to unforeseen technical challenges, increased reliance
on AI
systems, and potential disruptions in our operations. Additionally, the rapidly evolving nature of AI may necessitate continuous updates
to our risk
management strategies and compliance frameworks to address emerging ethical and regulatory concerns. As we expand our use
of AI, we are committed to
mitigating these risks through robust data protection measures, regular monitoring, and ongoing employee training;
however, there can be no assurance that
these measures will fully mitigate the associated risks.
Risks Related to Intellectual Property
Our success depends in part on our ability
to obtain and maintain protection in the United States and other countries for the intellectual property
relating to or incorporated into
our technology and products, including the patents protecting our manufacturing process.
Our success depends in large
part on our ability to obtain and maintain protection in the United States and other countries for the intellectual
property covering
or incorporated into our technology and products, especially intellectual property related to our manufacturing processes. At present,
we
consider our patents relating to our manufacturing process to be material to the operation of our business as a whole.
However, the patent landscape
in the biotechnology and pharmaceutical fields is highly complicated and uncertain and involves complex legal,
factual and scientific
questions. Changes in either patent laws or in the interpretation of patent laws in the United States and other countries may diminish
the value and strength of our intellectual property or narrow the scope of our patent protection. In addition, we may fail to apply for
or be unable to obtain
patents necessary to protect our technology or products or enforce our patents due to lack of information about
the exact use of our processes by third
parties. Even if patents are issued to us or to our licensors, they may be challenged, narrowed,
invalidated, held to be unenforceable or circumvented, which
could limit our ability to prevent competitors from using similar technology
or marketing similar products, or limit the length of time our technologies and
products have patent protection. Additionally, many of
our patents relate to the processes we use to produce our products, not to the products themselves. In
many cases, the plasma-derived
products we produce or intend to develop in the future will not, in and of themselves, be patentable. Since many of our
patents relate
to processes or uses of the products obtained therefrom, if a competitor is able to utilize a process that does not rely on our protected
intellectual property, that competitor could sell a plasma-derived product similar to one we have developed or sell it without infringing
these patents.
28
Patent rights are territorial;
thus, any patent protections we have will only be enforceable in those countries in which we have issued patents. In
addition, the laws
of certain countries do not protect our intellectual property rights to the same extent as do the laws of the U.S. and the European Union.
Competitors may successfully challenge our patents, produce similar drugs or products that do not infringe our patents, or produce drugs
in countries where
we have not applied for patent protection or that do not recognize or provide enforcement mechanisms for our patents.
Furthermore, it is not possible to
know the scope of claims that will be allowed in pending applications or which claims of granted patents,
if any, will be deemed enforceable in a court of
law.
Due to the extensive time
needed to develop, test and obtain regulatory approval for our therapeutic candidates or any product we may sell or
market, any patents
that protect our therapeutic candidates or any product we may sell, or market may expire early during commercialization. This may
reduce or eliminate any market advantages that such patents may give us. Following patent expiration, we may face increased competition
through the
entry of recombinant or generic products into the market and a subsequent decline in market share and profits.
In some cases, we may rely
on our licensors or partners to conduct patent prosecution, patent maintenance or patent defense on our behalf.
Therefore, our ability
to ensure that these patents are properly prosecuted, maintained, or defended may be limited, which may adversely affect our rights in
our therapeutic candidates and potential approved for marketing products. Any failure by our licensors or development or commercialization
partners to
properly conduct patent prosecution, maintenance, enforcement, or defense could materially harm our ability to obtain suitable
patent protection covering
our therapeutic candidates or products or ensure freedom to commercialize the products in view of third-party
patent rights, thereby materially reducing our
potential profits.
Our patents also may not afford
us protection against competitors or other third parties with similar technology. Because patent applications
worldwide are typically
not published until 18 months after their filing, and because publications of discoveries in scientific literature often lag behind
actual
discoveries, neither we nor our licensors can be certain that we or they were the first to file for protection of the inventions set forth
in such patent
applications. As a result, the patents we own and license may be invalidated in the future, and the patent applications
we own and license may not be
granted. Moreover, in the US, during 2012, the Leahy-Smith America Invents Act (“AIA”) created
a new legal proceeding, the inter partes review petition,
that allows third parties to challenge the validity of patents before
the Patent Trials and Appeals Board.
The costs of these proceedings
could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated patent
position. In addition,
if a third party prevails in such a proceeding and obtains an issued patent, we may be prevented from practicing technology or
marketing
products covered by that patent. Additionally, patents and patent applications owned by third parties may prevent us from pursuing certain
opportunities such as entering into specific markets or developing or commercializing certain products or reducing the cost effectiveness
of the relevant
business as a result of needing to make royalty payments or other business conciliations. Finally, we may choose to enter
into markets where certain
competitors have patents or patent protection over technology that may impede our ability to compete effectively.
Our patents are due to expire
at various dates between 2027 and 2044. However, because of the extensive time required for development, testing
and regulatory review
of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain
in force for only a short period following commercialization, thereby limiting advantages of the patent. Our pending and future patent
applications may not
lead to the issuance of patents or, if issued, the patents may not be issued in a form that will provide us with
any competitive advantage. We also cannot
guarantee that: any of our present or future patents or patent claims or other intellectual
property rights will not lapse or be invalidated, circumvented,
challenged or abandoned; our intellectual property rights will provide
competitive advantages or prevent competitors from making or selling competing
products; our ability to assert our intellectual property
rights against potential competitors or to settle current or future disputes will not be limited by our
agreements with third parties;
any of our pending or future patent applications will be issued or have the coverage originally sought; our intellectual
property rights
will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or we will not lose the ability
to
assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments. In
addition, our competitors or
others may design around our patents or protected technologies. Effective protection of our intellectual
property rights may also be unavailable, limited or
not applied in some countries, and even if available, we may fail to pursue or obtain
necessary intellectual property protection in such countries. In
addition, the legal systems of certain countries do not favor the aggressive
enforcement of patents and other intellectual property rights, and the laws of
foreign countries may not protect our rights to the same
extent as the laws of the United States. As a result, our intellectual property may not provide us
with sufficient rights to exclude others
from commercializing products similar or identical to ours. In order to preserve and enforce our patent and other
intellectual property
rights, we may need to make claims, apply certain patent or other regulatory procedures or file lawsuits against third parties. Such
proceedings
could entail significant costs to us and divert our management’s attention from developing and commercializing our products. Lawsuits
may
ultimately be unsuccessful and may also subject us to counterclaims and cause our intellectual property rights to be challenged, narrowed,
invalidated or
held to be unenforceable.
Additionally, unauthorized
use of our intellectual property may have occurred or may occur in the future, including, for example, in the production
of counterfeit
versions of our products. Counterfeit products may use different and possibly contaminated sources of plasma and other raw materials,
and
the purification process involved in the manufacture of counterfeit products may raise additional safety concerns, over which we have
no control. Although
we have taken steps to minimize the risk of unauthorized uses of our intellectual property, including for the production
of counterfeit products, any failure
to identify unauthorized use of, and otherwise adequately protect, our intellectual property could
adversely affect our business, including reducing the
demand for our products. Additionally, any reported adverse events involving counterfeit
products that purported to be our products could harm our
reputation and the sale of our products in particular and consumer willingness
to use plasma-derived therapeutics in general. Moreover, if we are required
to commence litigation related to unauthorized use, whether
as a plaintiff or defendant, such litigation would be time-consuming, force us to incur
significant costs and divert our attention and
the efforts of our management and other employees, which could, in turn, result in lower revenue and higher
expenses.
29
In addition to patented technology, we rely
on our unpatented proprietary technology, trade secrets, processes and know-how.
We rely on proprietary information
(such as trade secrets, know-how and confidential information) to protect intellectual property that may not be
patentable, or that we
believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by
entering into confidentiality agreements, or consulting, services, material transfer agreements or employment agreements that contain
non-disclosure and
non-use provisions, as well as ownership provisions, with our employees, consultants, service providers, contractors,
scientific advisors and third parties.
However, we may fail to enter into the necessary agreements, and even if entered into, these agreements
may be breached or otherwise fail to prevent
disclosure, third-party infringement or misappropriation of our proprietary information,
may be limited as to their term and may not provide an adequate
remedy in the event of unauthorized disclosure or use of proprietary information.
We have limited control over the protection of trade secrets used by our
third-party manufacturers, suppliers, other third parties which
are granted with license to use our know-how and former employees and could lose future
trade secret protection if any unauthorized disclosure
of such information occurs. In addition, our proprietary information may otherwise become known or
be independently developed by our competitors
or other third parties. To the extent that our employees, consultants, service providers, contractors,
scientific advisors and other third
parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or
resulting know-how
and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights,
and failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position.
Furthermore, laws
regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets.
We also rely on physical and
electronic security measures to protect our proprietary information, but we cannot provide assurance that these
security measures will
not be breached or provide adequate protection for our property. There is a risk that third parties may obtain and improperly utilize
our proprietary information to our competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information
or take
appropriate and timely steps to enforce our intellectual property rights. See “—Our business and operations would
suffer in the event of computer system
failures, cyber-attacks on our systems or deficiency in our cyber security measures.”
Changes in either U.S. or foreign patent
law or in the interpretation of such laws could diminish the value of patents in general, thereby impairing our
ability to protect our
products.
Our success, like the success
of many other biotechnology companies, is heavily dependent on intellectual property and on patents in particular.
The procurement and
enforcement of patents in the biotechnology industry is complex from a technological and legal standpoint, and the process is
therefore
costly, time-consuming and inherently uncertain. In addition, on September 16, 2011, the AIA was signed into law, introducing significant
changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted. An important change introduced
by the AIA is that,
as of March 16, 2013, the United States transitioned to a “first-to-file” system for deciding which
party should be granted a patent when two or more patent
applications are filed by different parties claiming the same invention. A third
party that files a patent application with the United States Patent and
Trademark Office (“USPTO”) after that date but before
us could therefore be awarded a patent covering an invention of ours even if we had made the
invention before it was made by the third
party. As a result of this change of law, if we do not promptly file a patent application at the time of a new
product’s invention,
and if a third party subsequently invented and patented such product, we would lose our right to patent such invention.
The AIA also introduced new
limitations on where a patentee may file a patent infringement suit and new opportunities for third parties to
challenge any issued patent
in the USPTO. Such changes apply to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower
evidentiary
standard necessary to invalidate a patent claim in USPTO proceedings compared to the evidentiary standard in U.S. federal court, a third
party
could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence
would be
insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to
use the USPTO procedures to
invalidate our patent claims that would not have been invalidated if first challenged by the third party as
a defendant in a district court action.
Depending on decisions by
the U.S. Congress, federal courts, the USPTO, or similar authorities in foreign jurisdictions, the laws and regulations
governing patents
could change in unpredictable ways that would weaken our ability to obtain new patents and enforce our existing and future patents.
We may be subject to claims that we infringe,
misappropriate or otherwise violate the intellectual property rights of third parties.
The conduct of our business,
our Proprietary Products and/or Distribution products or product candidates may infringe or be accused of infringing
one or more claims
of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued
and to which we do not hold a license or other rights. For example, certain of our competitors and other third parties own patents and
patent applications in
the realm of our biosimilars distribution products, or in areas relating to critical aspects of our business and
technology, including the separation and
purification of plasma proteins, the composition of AAT, the use of AAT for different indications,
and the distribution or use of recombinant or biosimilar
pharmaceutical products, and these competitors may in the future allege that
we are infringing on their patent rights. We may face claims alleging that we
are infringing, misappropriating, or otherwise violating
the intellectual property rights of third parties, including trademarks, copyrights, or trade secrets. If
such claims are brought against
us, our strategic partners, or our manufacturing suppliers for Distribution products, we could incur significant legal
expenses and, if
unsuccessful in our defense, be required to pay substantial damages. Additionally, such claims could result in injunctions or other remedies
that may force us or our partners to cease or delay the manufacturing, exportation, or sale of the affected products or product candidates,
which could
materially impact our business and operations. See also “In recent years we entered into agreements for future distribution
in Israel of several biosimilar
product candidates, and the successful future distribution of these products is dependent upon several
factors some of which are beyond our control.”
30
In addition, we are a party
to certain license agreements that may impose various obligations upon us as a licensee, including the obligation to bear
the cost of
maintaining the patents subject to the license and to make milestone and royalty payments. If we fail to comply with these obligations,
the
licensor may terminate the license, in which event we might not be able to market any product that is covered by the licensed intellectual
property.
If we are found to be infringing,
misappropriating or otherwise violating the patent or other intellectual property rights of a third party, or in order
to avoid or settle
claims, we or our strategic partners may choose or be required to seek a license, execute cross-licenses or enter into a covenant not
to sue
agreement from a third party and be required to pay license fees or royalties or both, which could be substantial. These licenses
may not be available on
acceptable terms, or at all. Even if we or our strategic partners were able to obtain a license, the rights may
be nonexclusive, which could result in our
competitors gaining access to the same intellectual property. Ultimately, we could be prevented
from commercializing a product, or be forced to cease some
aspect of our business operations, if, as a result of actual or threatened
claims, we or our strategic partners are unable to enter into licenses on acceptable
terms.
There have been substantial
litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and
biotechnology industries.
In addition, to the extent that we gain greater visibility and market exposure as a public company in the United States, we face a
greater
risk of being involved in such litigation. In addition to infringement claims against us, we may become a party to other patent litigation
and other
proceedings, including interference, opposition, cancellation, re-examination and similar proceedings before the USPTO and its
foreign counterparts and
other regulatory authorities, regarding intellectual property rights with respect to our products. The cost to
us of any patent litigation or other proceeding,
even if resolved in our favor, could be substantial. Some of our competitors may be able
to sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater financial resources.
Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect
on our ability to compete in the marketplace or to conduct our business in accordance
with our plans and budget, and patent litigation
and other proceedings may also absorb significant management time.
Some of our employees, consultants
and service providers, were previously employed or hired at universities, medical institutes, or other
biotechnology or pharmaceutical
companies, including our competitors or potential competitors. While we take steps to prevent them from using the
proprietary information
or know-how of others in their work for us, we may be subject to claims that we or they have inadvertently or otherwise used or
disclosed
intellectual property, trade secrets or other proprietary information of any such employee’s former employer or former ordering
service or that
they have breached certain non-compete obligations to their former employers. Litigation may be necessary to defend against
these claims and, even if we
are successful in defending ourselves, could result in substantial costs to us or be distracting to our management.
If we fail to defend any such claims
successfully, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel.
If we are unable to protect our trademarks
from infringement, our business prospects may be harmed.
We own trademarks that identify
certain of our products, our business name and our logo, and have registered these trademarks in certain key
markets. Although we take
steps to monitor the possible infringement or misuse of our trademarks, it is possible that third parties may infringe, dilute or
otherwise
violate our trademark rights. Any unauthorized use of our trademarks could harm our reputation or commercial interests. In addition, our
enforcement against third-party infringers or violators may be unduly expensive and time-consuming, and the outcome may be an inadequate
remedy. Even
if trademarks are issued to us or to our licensors, they may be challenged, narrowed, cancelled, or held to be unenforceable
or circumvented.
Risks Related to Our Financial Position and
Capital Resources
We have incurred significant losses since
our inception and while we have been profitable in recent years, we may not be able to sustain profitability.
While we were profitable in
the years ended December 31, 2024, and 2023 we incurred significant losses since inception and as of December 31,
2024, we had an accumulated
deficit of $25.7 million.
The acquisition of the portfolio
of four FDA-approved products in November 2021 resulted in the recognition of significant balances of intangible
assets as well as contingent
consideration and other long-term liabilities. The recognized value of the intangible assets is amortized over their expected
useful life,
resulting in significant amortization expenses captured as costs of goods sold and sales and marketing expenses. For each of the years
ended
December 31, 2024, 2023 and 2022, such amortization expenses totaled $7.1 million. The contingent consideration and other long-term
liabilities are
reevaluated at the end of each reporting period resulting in significant revaluation cost recognized as financial expenses.
For the years ended December 31,
2024, 2023 and 2022, such financial expenses totaled $8.1 million, $1.0 million and $6.3 million, respectively.
We estimate to incur these significant
amortization and financial expenses for the foreseeable future.
While the acquisition of our
portfolio of four FDA-approved plasma-derived hyperimmune commercial products represented an important growth
driver and revenue source,
there can be no assurance that we will be able to continue to reap the benefits of such acquisition and any other future
acquisitions,
and we may not be able to generate or sustain profitability in future years.
31
Our financial position and operations may
be affected as a result of the indebtedness we may incur and the liabilities we assumed in connection with
the acquisition of the portfolio
of four FDA-approved products.
On November 15, 2021, to partially
fund the acquisition of the portfolio of four FDA-approved products, we obtained a $40 million debt facility
from Bank Hapoalim B.M.,
comprised of a $20 million short-term revolving credit facility and a $20 million five-year loan. In September 2023, we repaid
in full
the outstanding balance of the $20 million five-year loan. The credit facility was in effect for an initial period of 12 months, and effective
as of
January 1, 2023, the credit facility was reduced to NIS 35 million (approximately $10 million) and was extended for two additional
periods of 12 months
each through December 31, 2024. Through the end of 2024, we did not borrow any money under the credit facility.
On February 17, 2025, we converted
the credit facility to a NIS 35 million on-call credit facility from Bank Hapoalim, with each loan thereunder
bearing interest at a rate
of 6.3%. As part of the conversion, we also undertook not to create a floating charge over all or materially all of our assets. In
addition,
the previous credit facility, as described above, has been terminated, together with our obligations to meet the financial covenants thereunder.
Borrowings under the on-call
credit facility may have adverse consequences on our business, including:
●
expose us to the risk of increased interest rates;
●
prevent us from pledging our assets as collateral, which could limit our ability to obtain additional debt financing;
●
place us at a competitive disadvantage compared to our competitors that have less debt, better debt servicing options or stronger debt
servicing capacity; and
●
increase our cost of borrowing.
In addition, as part of the
acquisition of the portfolio of four FDA-approved products, we agreed to pay and assumed the following liabilities:
●
Up to $50 million of contingent consideration subject to the achievement of sales thresholds through December 31, 2034. As of December 31,
2024, the Company had paid the first two sales milestone payments on account of the contingent consideration and the third sales threshold is
expected to be achieved during the first quarter of 2025 and subsequently paid.
●
A total amount of $14.2 million on account of acquired inventory to be paid in ten equal quarterly instalments of $1.5M each (or the
remaining balance at the final instalment). As of December 31, 2024, we had paid all such instalments.
●
Future payment of royalties (some of which are perpetual) and milestone payments to third parties subject to the achievement of
corresponding CYTOGAM related net sales thresholds and milestones.
The future payments of such
obligations may have a significant effect on our cash availability in future periods and may potentially require us to
assume more debt.
For additional information, see Note 13 in our consolidated financial statements included in this Annual Report.
Our business requires substantial capital,
including potential investments in large capital projects, to operate and grow and to achieve our strategy of
realizing increased operating
leverage, for which we may incur debt or issue additional equity.
In order to obtain and maintain
FDA, EMA and other regulatory approvals for product candidates and new indications for existing products, we
may be required to enhance
the facilities and processes by which we manufacture existing products, to develop new product delivery mechanisms for
existing products,
to develop innovative product additions and to conduct clinical trials. We face a number of obstacles that we will need to overcome in
order to achieve our operating goals, including but not limited to the successful development of experimental products for use in clinical
trials, the design
of clinical study protocols acceptable to the FDA, the EMA and other regulatory authorities, the successful outcome
of clinical trials, scaling our
manufacturing processes to produce commercial quantities or successfully transition technology, obtaining
FDA, EMA and other regulatory approvals of
the resulting products or processes and successfully marketing an approved or new product with
applicable new processes. To finance these various
activities, we may need to incur debt or issue additional equity. We may not be able
to structure our debt obligations on favorable economic terms and any
offering of additional equity would result in a dilution of the
equity interests of our current shareholders. To the extent that we raise additional funds to fund
our activities through debt financing,
if available, it may result in increased fixed payment obligations and may involve agreements that include covenants
limiting or restricting
our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional
funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights
to our technologies,
future revenue streams or product candidates, or grant licenses on terms that are not favorable to us. A failure
to fund these activities may harm our growth
strategy, competitive position, quality compliance and financial condition.
In addition, our manufacturing
facility requires continued investment and upgrades. Moreover, any enhancements to our manufacturing facilities
necessary to obtain FDA
or EMA approval for product candidates or new indications for existing products could require large capital projects. We may also
undertake
such capital projects in order to maintain compliance with cGMP or expand capacity. Capital projects of this magnitude involve technology
and
project management risks. Technologies that have worked well in a laboratory or in a pilot plant may cost more or not perform as well,
or at all, in full scale
operations. Projects may run over budget or be delayed. We cannot be certain that any such project will be completed
in a timely manner or that we will
maintain our compliance with cGMP, and we may need to spend additional amounts to achieve compliance.
Additionally, by the time multi-year projects
are completed, market conditions may differ significantly from our initial assumptions regarding
competitors, customer demand, alternative therapies,
reimbursement and public policy, and as a result capital returns may not be realized.
In addition, to fund large capital projects, we may similarly need to
incur debt or issue additional dilutive equity. A failure to fund
these activities may harm our growth strategy, competitive position, quality compliance and
financial condition.
32
Our current working capital may not be sufficient
to complete our research and development with respect to any or all of our pipeline products or to
commercialize our products.
As of December 31, 2024, we
had cash and cash equivalents of $78.4 million. We plan to fund our future operations through continued sales and
distribution of our
Proprietary Products and Distribution products, commercialization and/or out-licensing of our pipeline product candidates, and as
requires
raising additional capital through the sale of equity or debt. These amounts may not be sufficient to complete the research and development
of all
of our candidates, and there can be no assurances of the financial success of our commercialization activities or our ability to
access the equity and debt
capital markets on terms acceptable to us, if at all. To the extent we are unable to fund our research and
development, our future product development
activities could be materially adversely affected.
We are subject to foreign currency exchange
risk.
We receive payment for our
sales and make payments for resources in a number of different currencies. While our sales and expenses are primarily
denominated in U.S.
dollars, our financial results may be adversely affected by fluctuations in currency exchange rates as a portion of our sales and
expenses
are denominated in other currencies, including the NIS and the Euro. Market volatility and currency fluctuations may limit our ability
to cost-
effectively hedge against our foreign currency exposure and, in addition, our ability to hedge our exposure to currency fluctuations
in certain emerging
markets may be limited. Hedging strategies may not eliminate our exposure to foreign exchange rate fluctuations and
may involve costs and risks of their
own, such as devotion of management time, external costs to implement the strategies and potential
accounting implications. Foreign currency fluctuations,
independent of the performance of our underlying business, could lead to materially
adverse results or could lead to positive results that are not repeated in
future periods.
Events in global credit markets may impact
our ability to obtain financing or increase the cost of future financing, including interest rate fluctuations
based on macroeconomic
conditions that are beyond our control.
During periods of volatility
and disruption in the U.S., European, Israeli or global credit markets, obtaining additional or replacement financing
may be more difficult,
and the cost of debt could be high. The high cost of debt may limit our ability to have cash on hand for working capital, capital
expenditures
and acquisitions on terms that are acceptable to us.
To service any future indebtedness and other
obligations, we may require a significant amount of cash and our ability to generate cash depends on
many factors beyond our control.
The capability to pay and
refinance any future indebtedness and to fund working capital requirements and planned capital expenditures will
depend on our ability
to generate cash in the future. A significant reduction in our operating cash flows resulting from changes in economic conditions,
increased
competition or other events beyond our control could increase the need for additional or alternative sources of liquidity and could have
a material
adverse effect on our business, financial condition, results of operations, prospects and our ability to service any future
debt and other obligations. If we are
unable to service any future indebtedness through sufficient cash flows from operations, we will
be forced to shift to alternative strategies, which may
include the reducing of capital expenditures, the sale of assets, the restructuring
or refinancing of debt (if any) or the seeking of additional equity. We
cannot assure that these alternative strategies, if any, could
be implemented on satisfactory and commercially reasonable terms, that they would provide
sufficient funds to make the required payments
on our debt or to fund our other liquidity needs.
Risks Related to Our Ordinary Shares
The requirements of being a public company
in the United States, as well as in Israel, may strain our resources and distract our management, which
could make it difficult to manage
our business and could have a negative effect on our results of operations and financial condition.
As a public company whose
shares are traded on the Nasdaq Global Select Market (“Nasdaq”) and the Tel Aviv Stock Exchange (the “TASE”),
we
are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these
reporting and
regulatory requirements is time consuming, and may result in increased costs to us and could have a negative effect on our
business, results of operations
and financial condition. As a public company in the United States, we are subject to the reporting requirements
of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and the requirements of the Sarbanes-Oxley Act of
2002 (“SOX”). These requirements may place a strain on our systems
and resources. The Exchange Act requires that we file annual
and current reports, and file or make public certain additional information, with respect to our
business and financial condition. SOX
requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.
To maintain and
improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff
and
provide additional management oversight. These activities may divert management’s attention from other business concerns, which
could have a material
adverse effect on our business, financial condition and results of operations. Furthermore, as our business changes
and if we expand either through
acquisitions or by means of organic growth, our internal controls may become more complex and we will
require significantly more resources to ensure our
internal controls remain effective. Failure to implement required new or improved controls,
or difficulties encountered in their implementation, could
impact our financial information and adversely affect our operating results
or cause us to fail to meet our reporting obligations. If we identify material
weaknesses, the disclosure of that fact, even if quickly
remediated, could require significant resources to remediate, expose us to legal or regulatory
proceedings, and reduce the market’s
confidence in our financial statements and negatively affect our share price.
33
Our share price may be volatile.
The market price of our ordinary
shares is highly volatile and could be subject to wide fluctuations in price as a result of various factors, some of
which are beyond
our control. These factors include:
●
actual or anticipated fluctuations in our financial condition and operating results;
●
overall conditions in the specialty pharmaceuticals market;
●
loss of significant customers or changes to agreements with our strategic partners;
●
changes in laws or regulations applicable to our products;
●
actual or anticipated changes in our growth rate relative to our competitors;
●
announcements of clinical trial results, technological innovations, significant acquisitions, strategic alliances, joint ventures or capital
commitments by us or our competitors;
●
changes in key personnel;
●
fluctuations in the valuation of companies perceived by investors to be comparable to us;
●
the issuance of new or updated research reports by securities analysts;
●
disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain intellectual property
protection for our technologies;
●
announcement of, or expectation of, additional financing efforts;
●
sales of our ordinary shares by us or our shareholders;
●
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
●
The outcomes of litigation proceedings involving us;
●
Share price analyses or other information disseminated by analysts, influencers, and bloggers on social media platforms;
●
recalls and/or adverse events associated with our products; and
●
general political, economic and market conditions.
Furthermore, the stock markets
have experienced extreme price and volume fluctuations that have affected and continue to affect the market price
of equity securities
of many companies. Broad market and industry fluctuations, as well as general economic, political and market conditions, may
negatively
impact the market price of our ordinary shares.
In the past, companies that
have experienced volatility in the market price of their shares have been subject to securities class action litigation or
derivative
actions. We, as well as our directors and officers, may also be the target of these types of litigation and actions in the future. Securities
litigation
against us could result in substantial costs and divert our management’s attention from other business concerns, which
could seriously harm our business.
34
If securities or industry analysts do not
publish or cease publishing research or reports about us, our business, or our market, or if they adversely
change their recommendations
or publish negative reports regarding our business or our shares, our share price and trading volume could be
negatively impacted.
The trading market for our
ordinary shares may be influenced by research and reports that industry or securities analysts may publish about us, our
business, our
market, or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover
us
or, if they do, provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding
our shares, or provide
more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst
who may cover us were to cease
coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could negatively impact
our share price or trading volume.
Information published by influencers and
bloggers on various social media platforms can cause significant volatility in our share price and trading
volume, impacting investor
perception and market stability.
The increased use of
social media platforms and the influence of online content creators, such as influencers and bloggers as tools for analyzing
and
recommending investments in the securities market, present risks to the stability and valuation of our share price. Social media
content can rapidly
disseminate information, opinions, and rumors about our company and our securities, which may not always be
accurate or based on verified facts and may
be misleading. This can lead to several potential risks, including: (i)
social-media-driven trends and sentiments can cause significant fluctuations in our
share price, as evidenced by recent coverage of
us by a social media influencer that resulted in an increase in our share price and trading volume; (ii)
negative or misleading
information spread through social media can harm our reputation or lead to a loss of investor confidence, thereby adversely
affecting our share price and market capitalization; (iii) attracting regulatory attention which could lead to investigations or
actions by regulatory
authorities, potentially resulting in fines, sanctions, or other legal consequences; (iv) sudden surges in
buying or selling activity driven by social media
trends can lead to short-term price spikes or drops, which may not reflect our
long-term value or strategic direction; and (v) the need to monitor and
respond to social media content can divert
management’s attention and resources from core business operations, resulting in significant costs and
negatively
impacting operational efficiency.
Our shareholders may experience significant
dilution as a result of any additional financing using our equity securities or may experience a decrease
in the share price due to sales
of our equity securities.
To the extent that we raise
additional funds to fund our activities through the sale of equity or securities that are convertible into or exchangeable
for, or that
represent the right to receive, ordinary shares or substantially similar securities, your ownership interest will be diluted. Any additional
capital
raised through the sale of equity securities will likely dilute the ownership percentage of our shareholders. For example, in
September 2023, we
consummated a $60.0 million private placement of approximately 12.6 million ordinary shares to FIMI Opportunity Funds.
Future sales of ordinary shares by affiliates
could cause our share price to fall.
The FIMI Opportunity Funds
collectively own 22,084,287 of our outstanding ordinary shares (representing an ownership percentage of 38.4% of
the outstanding shares
and 38.3% on a fully diluted basis as March,1 2025). Pursuant to a registration rights agreement entered into with FIMI Opportunity
Funds
on January 20, 2020, as amended on May 23, 2023, they have “demand” and “piggyback” registration rights covering
the ordinary shares of our
company held by them. All shares of FIMI Opportunity Funds sold pursuant to an offering covered by a registration
statement would be freely transferable.
Sales of a substantial number of shares of our ordinary shares, or the perception that the FIMI
Opportunity Funds may exercise their registration rights,
could put downward pressure on the market price of our ordinary shares and could
impair our future ability to raise capital through an offering of our equity
securities.
The significant share ownership positions and board representation
of the FIMI Opportunity Funds and Leon Recanati may limit our shareholders’
ability to influence corporate matters.
The FIMI Opportunity Funds
(three of whose partners are members of our board of directors, one of which serves as our chairman) and Leon
Recanati, a member of our
board of directors, beneficially owned, directly and indirectly, approximately 38.4% and 6.1% of our outstanding ordinary
shares, respectively,
as of March,1 2025. For additional information, see “Item 6. Directors, Senior Management and Employees — Share Ownership”
and
“Item 7. Major Shareholders and Related Party Transactions — Major Shareholders.” Accordingly, the FIMI Opportunity
Funds and Leon Recanati,
through their equity ownership and board representation, individually and collectively, have significant influence
over the outcome of matters required to
be submitted to our shareholders for approval, including decisions relating to the election of
directors (other than our external directors, for whose election
the approval of the majority of shares held by non-controlling shareholders
and non-interested shareholders is required under Israeli law) and the outcome
of any proposed acquisition, merger or consolidation of
our company. Their interests may not be consistent with those of our other shareholders. In
addition, these parties’ significant
interest in us may discourage third parties from seeking to acquire control of us, which may adversely affect the market
price of our
shares. This concentration of ownership may also cause a decrease in the volume of trading or otherwise adversely affect our share price.
35
Our ordinary shares are traded on more than
one market and this may result in price variations.
Our ordinary shares have been
traded on the TASE since August 2005, and on Nasdaq since May 2013. Trading in our ordinary shares on these
markets takes place in different
currencies (U.S. dollars on Nasdaq and NIS on the TASE), and at different times (as a result of different time zones, trading
days and
public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these
and other
factors. Any decrease in the price of our ordinary shares on the TASE could cause a decrease in the trading price of our ordinary
shares on Nasdaq, and a
decrease in the price of our ordinary shares on Nasdaq could likewise cause a decrease in the trading price of
our ordinary shares on the TASE.
Our U.S. shareholders may suffer adverse
tax consequences if we are characterized as a passive foreign investment company.
Generally, if, for any taxable
year, (i) at least 75% of our gross income is passive income or (ii) at least 50% of the value of our assets is
attributable to assets
that produce passive income or are held to produce passive income, we would be characterized as a passive foreign investment
company (“PFIC”)
for U.S. federal income tax purposes. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences,
including
having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential
rate
applicable to dividends received on our ordinary shares, and having interest charges apply to distributions by us and the proceeds
of share sales. See “Item
10. Additional Information — E. Taxation — United States Federal Income Taxation.”
Based upon the value of our
assets and the nature and composition of our income and assets, we do not believe that we were a PFIC for the taxable
year ended December
31, 2024, however, no assurances can be made in that regard. The determination of whether we are a PFIC is a fact-intensive
determination
made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation.
We are a “foreign private issuer”
and have disclosure obligations that are different from those of U.S. domestic reporting companies. As a result, we
may not provide you
the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it
more difficult
for you to evaluate our performance and prospects.
We are a foreign private issuer
and, as a result, are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we are
subject to reporting
obligations that, in certain respects, are less detailed and/or less frequent than those of U.S. domestic reporting companies. For
example,
we are not required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting
companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies.
We also have four
months after the end of each fiscal year to file our annual reports with the SEC and are not required to file current
reports as frequently or promptly as U.S.
domestic reporting companies. Furthermore, our directors and executive officers are not required
to report equity holdings under Section 16 of the
Exchange Act and are not subject to the insider short-swing profit disclosure and recovery
regime.
As a foreign private issuer,
we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure
that select groups of
investors are not privy to specific information about an issuer before other investors. However, we are still subject to the anti-fraud
and
anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on
us as a foreign
private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same
information about us and at the
same time as the information provided by U.S. domestic reporting companies.
As we are a “foreign private issuer”
and follow certain home country corporate governance practices instead of otherwise applicable Nasdaq corporate
governance requirements,
our shareholders may not have the same protections afforded to shareholders of domestic U.S. issuers that are subject to all
Nasdaq corporate
governance requirements.
As a foreign private issuer,
we have the option to, and we do, follow Israeli corporate governance practices rather than certain corporate
governance requirements
of Nasdaq, except to the extent that such laws would be contrary to U.S. securities laws, and provided that we disclose the
requirements
we are not following and describe the home country practices we follow instead. We have relied on this “foreign private issuer exemption”
with respect to all the items listed under the heading “Item 16G. Corporate Governance,” including with respect to shareholder
approval requirements in
respect of equity issuances and equity-based compensation plans, the requirement to have independent oversight
on our director nominations process and to
adopt a formal written charter or board resolution addressing the nominations process, the
quorum requirement for meetings of our shareholders and the
Nasdaq requirement to have a formal charter for the compensation committee.
We may in the future elect to follow home country practices in Israel with
regard to other matters. As a result, our shareholders may
not have the same protections afforded to shareholders of companies that are subject to all
Nasdaq corporate governance requirements.
See “Item 16G. Corporate Governance.”
36
We may not pay dividends in the future.
While we have historically retained our earnings to finance operations
and expand our business, on March 5, 2025, we announced a special cash
dividend of $0.20 per share (approximately $11.5 million in the
aggregate), with a record date (ex-dividend date) of March 17, 2025, which will be paid on
April 7, 2025. We have not determined whether
we will continue to make distributions in the future or refrain from similar distributions. Any determination
to pay dividends in the
future will be at the discretion of our board of directors and will depend on a number of factors, including our financial condition,
operating results, capital requirements, and other factors that the board of directors considers relevant. Israeli law limits our ability
to declare and pay
dividends and may subject our dividends to Israeli withholding taxes. In addition, any agreement that we may enter
into in the future may contain terms
prohibiting or limiting the amount of dividends that may be declared or paid on our ordinary shares.
Accordingly, investors should rely on sales of their
ordinary shares after price appreciation, which may never occur, as the only way
to realize any future gains on their investments. See Exhibit 2.1
“Description of Securities—Dividend and Liquidation Rights”
and Item 10. Additional Information — E. Taxation — Israeli Tax Considerations and
Government Programs — Taxation
of Our Shareholders — Dividends.”
Risks Relating to Our Incorporation and Location
in Israel
Our business could be adversely affected
by political, economic and military instability in Israel and its region.
We
are incorporated under Israeli law and our principal offices and manufacturing facilities are located in Israel. In addition, most of
our officers
and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding
region may directly affect our
business.
Since
the State of Israel was established in 1948 and in recent years, armed conflicts have occurred between Israel and its neighboring countries
and terrorist organizations active in the region, which have involved missile strikes, hostile infiltrations, terrorism against civilian
targets in various parts of
Israel, and recently abduction of soldiers and citizens.
On
October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on
civilian and
military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers. These attacks
resulted in extensive deaths and
injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack,
Israel’s security cabinet declared war against Hamas
and as a result, the Israeli military began to call-up reservists for active
duty. See also “— Our operations may be disrupted by the obligations of personnel
to perform military service.” Subsequent
to the commencement of the Hamas-Israel war, Hezbollah in Lebanon launched missile, rocket and shooting
attacks against Israeli military
sites, troops and Israeli towns in northern Israel; and the Houthis, a military organization based in Yemen, launched a series
of attacks
on global shipping routes in the Red Sea, as well as direct attacks on various parts of Israel. In response to these attacks, the Israeli
army carried
out a number of targeted strikes on sites belonging to Hezbollah and conducted ground operations in southern Lebanon. In
addition, in April and October
2024, Iran launched direct attacks on Israel, involving hundreds of drones and ballistic missiles launched
directly towards highly populated civilian areas
and military bases. In November 2024, a ceasefire agreement was reached between Hezbollah
in Lebanon and Israel and in January 2025, a temporary
ceasefire agreement was reached between Hamas in Gaza and Israel; however, we cannot
predict if and to what extent these ceasefire agreements will
remain in effect or be upheld.
While
we have not been materially impacted by the conditions in Israel since the war broke out in October 2023, hostilities continue to
exist at
varying levels of intensity, and the situation remains volatile, with the potential for escalation into a broader regional
conflict involving additional terrorist
organizations and possibly other countries, and we cannot predict how such conflicts will
ultimately affect our business and operations (including our
manufacturing facility in Beit Kama, which is located in southern
Israel, approximately 20 miles east of the Gaza Strip, and supply chains) or Israel’s
economy in general. These events could
lead to increased costs, risks to employee safety, and challenges to business continuity, potentially resulting in
financial
losses.
37
Our commercial insurance does
not cover losses that may occur as a result of events associated with war. Losses resulting from acts of terrorism
may be partially covered
under certain circumstances. Although the Israeli government currently covers certain value of direct damages that are caused by
terrorist
attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential
damages. Any losses or damages incurred by us could have a material adverse effect on our business.
The
continuation of the war has also led to a deterioration of certain indicators of Israel’s economic standing, for instance, a downgrade
in Israel’s
credit rating by rating agencies such as by Moody’s, S&P Global, and Fitch.
The global perception of Israel
and Israeli companies, influenced by actions by international judicial bodies, may lead to increased sanctions and
other negative measures
against Israel and Israeli companies. There is also a growing movement among countries, activists, and organizations to boycott
Israeli
goods and services or restrict doing business with Israel and Israeli companies. These restrictions may limit materially our ability to
obtain raw
materials from these countries or sell our products to companies in these countries. Any hostilities involving Israel or the
interruption or curtailment of
trade between Israel and its present trading partners, or significant downturn in the economic or financial
condition of Israel, could adversely affect our
operations and product development, cause our sales to decrease and adversely affect the
share price of publicly traded companies having operations in
Israel, such as us.
Finally, political conditions
within Israel may affect our operations. Israel held five general elections between 2019 and 2022, and prior to October
2023, the Israeli
government pursued extensive changes to Israel’s judicial system and has recently renewed its efforts to effect such changes. In
response
to the foregoing developments, certain individuals, organizations, and institutions, both within and outside of Israel, voiced
concerns that such proposed
changes, if adopted, may negatively impact the business environment in Israel. Such proposed changes may also
lead to political instability or civil unrest.
Actual or perceived political instability in Israel or any negative changes in the political
environment, may individually or in the aggregate adversely affect
the Israeli economy and, in turn, our business, financial condition,
results of operations and growth prospects and the market price of our shares, as well as
on our ability to raise additional capital,
if deemed necessary by our management and board of directors.
Our operations may be disrupted by the obligations
of personnel to perform military service.
As of December 31, 2024, we
had 374 employees based in Israel. Certain of our Israeli employees may be called upon to perform up to 36 days
(and in some cases more)
of annual military reserve duty until they reach the age of 40 (and in some cases, up to 45 or older) and, in emergency
circumstances,
could be called to active duty. In connection with the Israeli security cabinet’s declaration of war against Hamas in October 2023
and
possible hostilities with other organizations and jurisdictions, several hundred thousand Israeli military reservists were drafted
to perform immediate
military service. While we have not been impacted to date by any absences of our personnel, our operations could
be disrupted by the absence of a
significant number of our employees related to their, or their spouse’s, military service or the
absence for extended periods of one or more of our key
employees for military service. Such disruption could materially adversely affect
our business and results of operations. Additionally, the absence of a
significant number of the employees of our Israeli suppliers and
contractors related to military service or the absence for extended periods of one or more
of their key employees for military service
may disrupt their operations, in which event our ability to deliver products to customers may be materially
adversely affected.
The tax benefits under Israel tax legislation
that are or may be available to us require us to continue to meet various conditions and may be terminated
or reduced in the future, which
could increase our costs and taxes.
We obtained a tax ruling
from the Israel Tax Authority (“ITA”) according to which, among other things, our activity was qualified as an “industrial
activity,” as defined in the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”),
and was eligible for tax benefits as a
“Privileged Enterprise,” which apply to the turnover attributed to such enterprise,
for a period of up to ten years from the first year in which we generated
taxable income. The tax benefits under the Privileged Enterprise
status expired at the end of 2023. We have applied for a new tax ruling from the ITA
according to which, if approved, among other things,
our activity would be qualified as an “industrial activity,” as defined in Investment Law, and our
income from sales of our
Proprietary Products (including royalties-based income) would be deemed “Preferred Income”, or “Preferred Technology
Income” (in each case, within the meaning of the Investment Law), to the extent we meet the requirements of being a Preferred Technology
Enterprise.
There can be no assurance that we will comply with the conditions required to remain eligible for benefits under the Investment
Law in the future,
including under the tax ruling (if obtained), or that we will be entitled to any additional benefits thereunder. If
we do not fulfill these conditions in whole or
in part, the benefits can be canceled and we may be required to refund the amount of the
benefits, linked to the Israeli consumer price index, with interest.
In order to remain eligible
for the tax benefits under the Investment Law, we must continue to meet certain conditions stipulated in the Investment
Law and its regulations,
as amended, and must also comply with the conditions set forth in the tax ruling (if obtained). These conditions may include,
among other
things, that the production, directly or through subcontractors, of all our products should be performed within certain regions of Israel.
If we
do not meet these requirements, the tax benefits would be reduced or canceled and we could be required to refund any tax benefits
that we received in the
past, in whole or in part, linked to the Israeli consumer price index, together with interest. Further, these
tax benefits may be reduced or discontinued in the
future. If these tax benefits are canceled, our Israeli taxable income would be subject
to regular Israeli corporate tax rates. The standard corporate tax rate
for Israeli companies is 23% since 2018. For more information
about applicable Israeli tax regulations, see “Item 10. Additional Information — E. Taxation
— Israeli Tax Considerations
and Government Programs.”
38
In the future, we may not
be eligible to receive additional tax benefits under the Investment Law if we increase certain of our activities outside of
Israel. Additionally,
in the event of a distribution of a dividend from the abovementioned tax exempt income, in addition to withholding tax at a rate of 20%
(or a reduced rate under an applicable double tax treaty), we will be subject to tax on the otherwise exempt income (grossed-up to reflect
the pre-tax
income that we would have had to earn in order to distribute the dividend) at the applicable corporate tax rate, which would
have been applied had we not
benefited from the exemption. Similarly, in the event of our liquidation or a share buyback, we will be subject
to tax on the grossed-up amount distributed
or paid at the corporate tax rate which would have been applied had we not benefited from
the exemption. For more information about applicable Israeli tax
regulations, see “Item 10. Additional Information —
E. Taxation — Israeli Tax Considerations and Government Programs.”
Tax matters, including changes in tax laws,
adverse determinations by taxing authorities and imposition of new taxes, could adversely affect our results
of operations and financial
condition. Furthermore, we may not be able to fully utilize our net operating loss carryforwards.
We are subject to the tax
laws and regulations of the State of Israel and numerous other jurisdictions in which we do business. Many judgments are
required in determining
our provision for income taxes and other tax liabilities, and the applicable tax authorities may not agree with our tax positions. In
addition, our tax liabilities are subject to other significant risks and uncertainties, including those arising from potential changes
in laws and/or regulations
in the State of Israel and the other countries in which we do business, the possibility of adverse determinations
with respect to the application of existing
laws, changes in our business or structure and changes in the valuation of our deferred tax
assets and liabilities. As of December 31, 2024, we had net
operating loss carryforwards (“NOLs”) for Israeli tax purposes
of approximately $13.4 million. If we are unable to fully utilize our NOLs to offset taxable
income generated in the future, our future
cash taxes could be materially and negatively impacted. For further detail regarding our NOLs, see Note 21 in
our consolidated financial
statements included in this Annual Report.
It may be difficult to enforce a U.S. judgment
against us and our officers and directors in Israel or the United States, or to assert U.S. securities laws
claims in Israel or serve
process on our officers and directors.
We are incorporated in Israel.
All of our directors and most of our executive officers and the Israeli experts named in this Annual Report reside
outside the United
States. The majority of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult
for
an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S.
federal securities laws
against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon these persons
in the United States. Additionally, it may be
difficult for an investor, or any other person or entity, to assert U.S. securities law
claims in original actions instituted in Israel. Israeli courts may refuse to
hear a claim based on an alleged violation of U.S. securities
laws on the grounds that Israel is not the most appropriate forum in which to bring such a
claim. Even if an Israeli court agrees to hear
a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be
applicable, the content
of applicable U.S. law must be proved as a fact by expert witnesses, which can be a time-consuming and costly process. Certain
matters
of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above.
Moreover, an Israeli court
will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of
judgments of Israeli
courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if
it was
obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same
matter between the same
parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel
at the time the foreign action was brought.
Your rights and responsibilities as our
shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities of
shareholders of U.S.
corporations.
Since we are incorporated
under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and
Israeli law. These
rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.-based corporations. In
particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and
performing its
obligations towards the company and other shareholders and to refrain from abusing its power in the company, including,
among other things, in voting at
the general meeting of shareholders on certain matters, such as an amendment to the company’s articles
of association, an increase of the company’s
authorized share capital, a merger of the company and approval of related party transactions
that require shareholder approval. A shareholder also has a
general duty to refrain from discriminating against other shareholders. In
addition, a controlling shareholder or a shareholder who knows that it possesses
the power to determine the outcome of a shareholder vote,
or who has the power to appoint or prevent the appointment of an office holder in the company
or has other powers towards the company,
has a duty to act in fairness towards the company. However, Israeli law does not define the substance of this duty
of fairness. See “Item
6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Specified Related Party Transactions under
Israeli
Law — Duties of Shareholders.” There is limited case law available to assist us in understanding the nature of this duty
or the implications of these
provisions. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders
that are not typically imposed on
shareholders of U.S. corporations.
39
Provisions of Israeli law and our articles
of association may delay, prevent or make undesirable an acquisition of all or a significant portion of our
shares or assets.
Certain provisions of
Israeli law and our articles of association could have the effect of delaying or preventing a change in control and may make it
more
difficult for a third party to acquire us or for our shareholders to elect different individuals to our board of directors, even if
doing so would be
beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for our
ordinary shares. For example, Israeli
corporate law regulates mergers and requires that a tender offer be effected when more than a
specified percentage of shares in a public company are
purchased. Under our articles of association, a merger shall require the
approval of two-thirds of the voting rights represented at a meeting of our
shareholders and voting on the matter, in person or by
proxy, and any amendment to such provision shall require the approval of 60% of the voting rights
represented at a meeting of our
shareholders and voting on the matter, in person or by proxy. Further, Israeli tax considerations may make potential
transactions
undesirable to us or to some of our shareholders, including such shareholders whose country of residence does not have a tax treaty
with Israel
granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free
share exchanges to the same extent as U.S.
tax law. Further, with respect to certain mergers, while Israeli tax law permits tax
deferral, the deferral is contingent on certain restrictions on future
transactions, including with respect to dispositions of
shares received as consideration, for a period of two years from the date of the merger. Moreover,
with respect to a certain share
swap transaction, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no
disposition of
the shares has occurred. See Exhibit 2.1, “Description of Securities —Acquisitions Under Israeli Law,” incorporated
herein by reference.
General Risks
The loss of one or more of our key employees
could harm our business.
We depend on the continued
service and performance of our key employees, including Amir London, our Chief Executive Officer, and our other
senior management staff.
We have entered into employment agreements with all of our senior management, including Mr. London, and other key
employees. Either party,
however, can terminate these agreements for any reason. The loss of key members of our executive management team could
disrupt our operations,
commercial and business development activities, or product development and have an adverse effect on our ability to meet our
targets and
grow our business.
Our ability to attract, recruit, retain
and develop qualified employees is critical to our success and growth.
We compete in a market
that involves rapidly changing technological and regulatory developments that require a wide-ranging set of expertise and
intellectual capital. In order for us to successfully compete and grow, we must attract, recruit, retain and develop the necessary
personnel who can provide
the expertise needed across the entire spectrum of our intellectual capital needs. While a number
of our key who have substantial experience with our
operations, we must also develop and exercise our personnel to provide
succession plans capable of maintaining continuity in the midst of the inevitable
unpredictability of human capital. However, the
market for qualified personnel is competitive, and we may not succeed in recruiting additional experienced
or professional
personnel, retaining current personnel or effectively replacing current personnel who depart with qualified or effective successors.
Many of
the companies with which we compete for experienced personnel have greater resources than us.
Our effort to retain and develop
personnel may also result in significant additional expenses, which could adversely affect our profitability. There
can be no assurance
that qualified employees will continue to be employed or that we will be able to attract and retain qualified personnel in the future.
Failure to retain or attract qualified personnel could have a material adverse effect on our business, financial condition and results
of operations.
We are subject to risks associated with
doing business globally.
Our operations are subject
to risks inherent in conducting business globally, including compliance with various laws, regulations and customs of
various jurisdictions.
Key risks include currency exchange fluctuations, changes in exchange controls, loss of business in government and public tenders,
nationalization,
expropriation, energy price volatility, raw material availability changes in taxation, import and export restrictions, and trade policy
shifts.
We also face risks related to anti-bribery and anti-corruption laws, such as the FCPA and the U.K. Bribery Act of 2010. Additional
challenges include
pricing restrictions, economic and political instability, cultural differences, intellectual property protection issues,
and operational disruptions due to war,
terrorism or social unrest.
Recent changes in U.S. and
international trade policies, export controls, sanctions, and tariffs could further impact our operations. For instance, in
February 2025,
the U.S. imposed new tariffs on Canada, which are currently suspended while negotiations take place for a long-term agreement. Our
products
WINRHO SDF, HEPAGAM B and VARIZIG, are manufactured in Canada and imported to the United States; therefore, if the negotiations are not
successful and additional tariffs on imports from Canada to the United States are implemented, the costs of these products would increase.
Additionally,
retaliatory tariffs imposed by other countries could further impact our sales and profitability. We may not be able to pass
these increased costs onto our
customers or otherwise mitigate these risks effectively, which could result in reduced profit margins and
negatively affect our financial performance. These
trade policy changes could also disrupt our supply chain, necessitating strategic
adjustments to maintain operational efficiency and stability.
40
We must also comply with trade
restrictions and economic sanctions, including restrictions on sales to parties that are listed on (or are owned or
controlled by one
or more parties listed on) denied party watch lists or restrictions on sale in certain regions. Sanctions laws pose potential liabilities,
penalties and reputational risks. The dynamic nature of sanctions and geopolitical developments may necessitate withdrawing from or limiting
exposure to
certain markets. Despite having compliance policies, we may face liabilities due to actions by employees or third parties.
Insurance companies’ risk
assessments regarding sanctions may limit our ability to obtain insurance in certain markets in which
we operate. For example, while our operations have
not been materially impacted by Russia’s actions in Ukraine to date, we may face
challenges in supplying products to our Russian distributor or receiving
payments due to Russian government actions. Non-compliance or
changes in applicable laws could have an adverse effect on our business, financial
condition or results of operations.
As a result of our increased global presence,
we face increasing challenges that could adversely impact our results of operations, reputation and
business.
In light of our global presence,
especially following our entry into new international markets and particularly in the MENA region, we face a
number of challenges in certain
jurisdictions that provide reduced legal protection, including poor protection of intellectual property, inadequate protection
against
crime (including bribery, corruption and fraud) and breaches of local laws or regulations, unstable governments and economies, governmental
actions that may inhibit the flow of goods and currency, challenges relating to competition from companies that already have a local presence
in such
markets and difficulties in recruiting sufficient personnel with appropriate skills and experience.
Local business practices in
jurisdictions in which we operate, and particularly in the MENA region, may be inconsistent with international
regulatory requirements,
such as anti-corruption and anti-bribery laws and regulations (including the FCPA and the U.K. Bribery Act of 2010) to which we
are subject.
Although we implement policies and procedures designed to ensure compliance with these laws, we cannot guarantee that none of our
employees,
contractors, service providers, partners, distributors and agents, will violate our policies or applicable laws. Any such violation could
have an
adverse effect on our business and reputation and may expose us to criminal or civil enforcement actions, including penalties
and fines.
Developments in the economy may adversely
impact our business.
Our operating and financial
performance may be adversely affected by a variety of factors that influence the general economy in the United States,
Europe, Israel,
Russia, Latin America, Asia and other territories worldwide, including global and local economic slowdowns, challenges faced by banks
and the health of markets for the sovereign debt. Many of our largest markets, including the United States, Latin America and states that
are members of
the Commonwealth of Independent States previously experienced dramatic declines in the housing market, high levels of unemployment
and
underemployment, and reduced earnings, or, in some cases, losses, for businesses across many industries, with reduced investments
in growth.
A recessionary economic environment
may adversely affect demand for our plasma-derived protein therapeutics. As a result of job losses, patients
in the U.S. and other markets
may lose medical insurance and be unable to purchase needed medical products or may be unable to pay their share of
deductibles or co-payments.
Hospitals may steer patients adversely affected by the economy to less costly therapies, resulting in a reduction in demand, or
demand
may shift to public health hospitals, which purchase our products at a lower government price. A recessionary economic environment may
also
lead to price pressure for reimbursement of new drugs, which may adversely affect the demand for our future plasma-derived protein
therapeutics.
A breakdown in our information technology
(IT) systems could result in a significant disruption to our business.
Our operations are highly
dependent on our information technology (IT) systems. If we were to suffer a breakdown in our systems, storage,
distribution or tracing,
we could experience significant disruptions affecting all our areas of activity, including our manufacturing, research, accounting and
billing processes and potentially cause disruptions to our manufacturing process for products currently in production. We may also suffer
from partial loss
of information and data due to such disruption.
Our business and operations would suffer
in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber security
measures.
Despite the implementation
of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to
damage from computer
viruses, unauthorized access, malware, natural disasters, fire, terrorism, war and telecommunication, electrical failures, cyber-
attacks
or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside
our
organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer
hackers, foreign
governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks
and intrusions from around the
world have increased. To the extent that any disruption or security breach results in a loss of or damage
to our data or applications, or inappropriate
disclosure of confidential or proprietary information and personal information, we could
incur liability due to lost revenues resulting from the unauthorized
use or theft of sensitive business information, remediation costs,
and litigation risks including potential regulatory action by governmental authorities. In
addition, any such disruption, security breach
or other incident could delay the further development of our future product candidates due to theft or
corruption of our proprietary data
or other loss of information. Our business and operations could also be harmed by any reputational damage with
customers, investors or
third parties with whom we work, and our competitive position could be adversely impacted.
41
Tax legislation in the United States may
impact our business.
Changes to tax legislation
in the United States, as well as the issuance of administrative rulings or court decisions, could impact our business. Tax
legislation
enacted in recent years made significant and wide-ranging changes to the U.S. Internal Revenue Code of 1986, as amended. Many aspects
of
such legislation that could affect our business remain subject to considerable uncertainty. Further, it is impossible to predict the
occurrence or timing of any
additional tax legislation or other changes in tax law that materially affect our business or investors.
Current and future accounting pronouncements
and other financial reporting standards, especially but not only concerning revenue recognition, might
negatively impact our financial
results.
We regularly monitor our compliance
with applicable financial reporting standards and review new pronouncements and drafts thereof that are
relevant to us. As a result of
new standards, changes to existing standards, including but not limited to IFRS 15 on revenue from contracts with customers,
which we
adopted in 2018, IFRS 16 on leases, which we adopted in 2019, IFRS 18, which is expected to be effective for annual reporting periods
beginning on or after 1 January 2027, as well as changes in these standards interpretation, we might be required to change our accounting
policies,
particularly concerning revenue recognition. In addition, we may be required to alter our operational policies to reflect new
or amended financial reporting
standards, or to restate our published financial statements. Such changes might have an adverse effect
on our reputation, business, financial position, and
profit, or cause an adverse deviation from our revenue and operating profit targets.
Sustainability
and environmental, social, and governance (“ESG”) initiatives could increase our costs or otherwise adversely impact our business.
In
recent years, public companies have faced scrutiny related to ESG practices and disclosures from certain investors, capital providers,
shareholder advocacy groups, other market participants and other stakeholder groups. Such scrutiny may result in increased costs, enhanced
compliance or
disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. While we
may at times engage in voluntary
ESG initiatives, such initiatives may be costly and may not have the desired effect. If our ESG practices
and reporting do not meet investor or other
stakeholder expectations, which continue to evolve, we may be subject to investor or regulator
engagement regarding such matters. Our failure to comply
with any applicable ESG rules or regulations could lead to penalties and adversely
impact our reputation, access to capital and employee retention. Such
ESG matters may also impact our third-party contract manufacturers
and other third parties on which we rely, which may augment or cause additional
impacts on our business, financial condition, or results
of operations.
Item 4. Information on the Company
A.
History and Development of the Company
Corporate Information
We were incorporated under
the laws of the State of Israel on December 13, 1990, under the name Kamada Ltd. In August 2005, we successfully
completed an initial
public offering on the TASE. In June 2013, we successfully completed an initial public offering in the United States on the Nasdaq.
The
address of our principal executive office is 2 Holzman St., Science Park, P.O. Box 4081, Rehovot 7670402, Israel, and our telephone number
is +972 8
9406472. Our website address is https://www.kamada.com/. The reference to our website
is intended to be an inactive textual reference and the information
on, or accessible through, our website is not intended to be part
of this Annual Report. The SEC maintains a website at https://www.sec.gov/search-filings
that contains reports, proxy and information statements and other information regarding registrants like us that file electronically with
the SEC. You can
also inspect the Annual Report on that website.
We have irrevocably appointed
Puglisi & Associates as our agent to receive service of process in any action against us in any United States federal
or state court.
The address of Puglisi & Associates is 850 Library Avenue, Suite 204, P.O. Box 885, Newark, Delaware 19715.
Capital Expenditures
For a discussion of our principal
capital expenditures for the three years ended December 31, 2024, and for those currently in progress, see “Item
5. Operating and
Financial Review and Prospects—Liquidity and Capital Resources.”
B.
Business Overview
We are a global biopharmaceutical
company with a portfolio of marketed products indicated for rare and serious conditions and a leader in the
specialty plasma-derived therapies
field. Our strategy is focused on driving profitable growth through four primary growth pillars:
First, organic growth from
our commercial activities, including continued investment in the commercialization and life cycle management of our
Proprietary Products,
which include six FDA-approved specialty plasma-derived products: KEDRAB®, CYTOGAM®, GLASSIA®, WINRHO SDF®,
VARIZIG®
and HEPAGAM B®, as well as KAMRAB®, KAMRHO (D)® and two types of equine-based anti-snake venom (“ASV”) products,
and the
products in our distribution segment portfolio, mainly through the launch of several biosimilar products in Israel.
42
Second, we aim to secure significant
new business development, in-licensing, collaboration, and/or merger and acquisition (“M&A”) opportunities
in 2025, which
we anticipate will enhance our marketed products portfolio and leverage our financial strength and existing commercial infrastructure
to
drive long-term growth.
Third, we are expanding our
plasma collection operations to support revenue growth through the sale of normal source plasma to other plasma-
derived manufacturers,
and to support our increasing demand for hyper-immune plasma. We currently have two operating plasma collection centers in the
United
States, in Beaumont Texas and Houston Texas, and plan to open our third center in San Antonio, Texas, by the end of the first quarter
of 2025.
Lastly, we are leveraging
our manufacturing, research and development expertise to advance the development and commercialization of additional
product candidates,
targeting areas of significant unmet medical need, with our lead product candidate Inhaled AAT, for which we are continuing to
progress
the InnovAATe clinical trial, a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial.
Our Business
Commercial Activities.
Our commercial activities
operate in two segments: the Proprietary Products segment and the Distribution segment.
Proprietary
Products Segment. The Proprietary Products segment includes our six FDA approved plasma-derived biopharmaceutical products:
KEDRAB, CYTOGAM, GLASSIA, WINRHO SDF, HEPAGAM B and VARIZIG, as well as KAMRAB, KAMRHO (D) and two types of equine-based
ASV
products. We distribute these products directly and through strategic partners or third-party distributors in over 30 countries. We
manufacture our
proprietary products at our cGMP production facility in Beit Kama, Israel, which is registered with the FDA, Israel, using
our proprietary platform
technology and know-how for the extraction and purification of proteins and immunoglobulins
(“IgGs”) from human plasma, as well as at third party
contract manufacturing facilities. In addition, our Proprietary
Products segment includes our plasma collection operations, where we collect Anti-Rabies
and Anti-D hyper-immune plasma for the
manufacture of some of our products (WINRHO SDF, KAMRHO (D), KAMRAB and KEDRAB) as well as
normal source plasma for sale to
third-parties.
Our Proprietary Products segment
sales totaled $141.4 million, $115.5 million and $102.6 million for the years ended December 31, 2024, 2023
and 2022, respectively. Most
revenues from the Proprietary Products segment are generated from sales in the United States (71%, 64% and 64% for the
years ended December
31, 2024, 2023 and 2022, respectively). For more information regarding the geographical sales breakdown see “Item 5. Operating
and
Financial Review and Prospects.”
◾ KEDRAB.
We market KEDRAB, a human rabies immune globulin (“HRIG”),
in the United States through a strategic distribution and supply
agreement with Kedrion. In December 2023, we entered into a binding memorandum
of understanding with Kedrion for the amendment and
extension of the distribution agreement between the parties, which represents the
largest commercial agreement secured by us to date.
Subsequently, in January 2025, we entered into the fifth amendment to the supply and
distribution agreement, which memorializes the agreements
and undertakings set forth in a binding memorandum of understanding, along with
additional terms and conditions. Under these agreements,
Kedrion committed to purchasing minimum quantities of KEDRAB during the first
four years (i.e., 2024 through 2027) of the eight-year term that
began in January 2024, generating projected minimum aggregate revenues
for us of approximately $180.0 million over such four-year period, of
which a minimum of approximately $135.0 million is to be acquired
during the remaining three years of such four-year period (i.e., 2025 through
2027). Our revenues from sales of KEDRAB to Kedrion during
2024 totaled $50.0 million as compared to $32.8 million and $16.2 million during
2023 and 2022, respectively. Such increase in 2024 and
2023 reflects the increased demand for KEDRAB in the U.S. market as well as improved
financial terms under the 2025 fifth amendment to
the supply and distribution agreement. The distribution and supply agreement includes the
potential expansion of KEDRAB distribution by
Kedrion to other territories beyond the United States.
◾ CYTOGAM. We sell CYTOGAM, CMV-IGIV, indicated for prophylaxis of CMV disease associated with solid organ transplantation in the
United States and Canada.
CYTOGAM, manufactured at our Israeli facility, has been available for commercial sale in the United States and
Canada since the fourth
quarter of 2023, following FDA and Health Canada approval of the CYTOGAM technology transfer process in May 2023
and July 2023, respectively.
Total revenues from CYTOGAM sales for the years ended December 31, 2024, 2023 and 2022 were $22.5 million,
$17.2 million and $22.6 million,
respectively. Revenues generated by CYTOGAM during 2024 reflect a return to the levels experienced in 2022.
We believe that our ongoing
clinical and medical affairs activities, which include collaborations with leading U.S-based solid organ transplantation
experts, to generate
and present new real-world data on the benefits of CYTOGAM, as well as planned prospective investigator-initiated studies
evaluating the
benefits and potential innovative uses of CYTOGAM, will continue to raise awareness for CYTOGAM. These efforts aim to
explore new approaches
to current clinical practices in CMV prevention in solid organ transplantation, which are expected to support sustained
sales growth for
CYTOGAM. We believe that the decline in CYTOGAM sales in 2023 compared to 2022 was primarily due to inventory
management by wholesalers
during the first nine months of the year, until new batches of CYTOGAM manufactured at our Israeli facility became
available, commencing
during the fourth quarter of 2023.
43
We expect that KEDRAB
and CYTOGAM, which combined accounted for more than 50% of our gross profitability in the year ended
December 31, 2024, will continue
to be our two leading products in our existing Proprietary Products portfolio for the foreseeable future.
◾
WINRHO SDF, HEPAGAM B and VARIZIG. We sell WINRHO SDF, HEPAGAM B and VARIZIG in the United States, Canada, and several
other international markets, mainly in South America and the MENA region. Total revenues from sales of these products for the years ended
December 31, 2024, 2023 and 2022, was $22.3 million, $26.7 million and $29.5 million, respectively. The revenue decrease during 2024 as
compared to prior years was primarily due to reduced sales of VARIZIG to an international organization. VARIZIG was supplied under an
agreement with such international organization from the fourth quarter of 2022 through the first half of 2023, with no sales of the product
to this
international organization during 2024. In December 2024, we were awarded a tender from such international organization to supply
VARIZIG for
distribution across Latin America for the years 2025-2027, and we forecast increased sales during 2025. We believe that the
decline in sales of
these products in 2023 compared to 2022 was primarily due to inventory management by our distributors as well as changes
in supply schedules
related to certain tenders.
◾ GLASSIA.
We are entitled to royalty income on sales by Takeda of GLASSIA in the United States and, commencing in 2024, in Canada.
Additionally,
we will be entitled to royalty income on sales of GLASSIA by Takeda in Australia and New Zealand, to the extent that GLASSIA
will be approved,
and sales will be generated in these markets by Takeda in the future. The royalty income is at a rate of 12% on net consolidated
sales
(in all applicable territories) through August 2025, and at a rate of 6% thereafter, until 2040, with a guaranteed minimum of $5 million
annually from 2022 to 2040. In 2024, we recognized $16.9 million in royalty income from Takeda, as compared to $16.1 million and $12.2
million in 2023 and 2022 (for the period from March to December 2022), respectively. In 2022, we also recognized a $2.0 million one-time
payment on account of the transfer of the GLASSIA U.S. Biologics License Application (“BLA”) to Takeda. Based on current GLASSIA
sales
and forecasted future growth, we expect annual royalties on sales of GLASSIA by Takeda in the range of $10 million to $20 million
per year for
2025 to 2040.
We also market GLASSIA
in other counties, mainly Argentina, Russia, Israel and more recently in Switzerland (in some of these markets
under a different brand
name), through local distributors. Total revenues derived from GLASSIA sales in these other countries during 2024 was
$15.2 million, as
compared to $7.4 million and $5.9 million during 2023 and 2022, respectively. These ex-U.S. GLASSIA sales generated a gross
margin exceeding
40% for the year ended December 31, 2024. The revenue increase in 2024 in comparison to 2023 and 2022 is due to patients
newly diagnosed
with AATD receiving GLASSIA treatment, as well as favorable market conditions and pricing terms with our distributors.
◾
Other Proprietary Products. Our total revenues from the sales of our other Proprietary Products, including KAMRAB
(a HRIG sold by us
outside the U.S. market) and KAMRHO (D) IM (for prophylaxis of hemolytic disease of newborns), as well as our ASVs
sold to the IMOH, were
$14.5 million in 2024, as compared to $15.3 million and $14.2 million during 2023 and 2022, respectively.
◾ Plasma
Collection. While we remain dependent on third-party supplies of hyper-immune plasma for the manufacturing of our Proprietary
Products, we believe that the expansion of our plasma collection capabilities will better support our hyper-immune plasma needs, potentially
lower
our raw material costs, and generate additional revenue through sales of collected normal source plasma to third parties. In 2024,
we significantly
expanded our hyper-immune plasma collection operations with the opening of our new plasma collection center in Houston,
Texas, which is
expected to become one of the largest hyper-immune plasma collection sites in the United States and will also collect
normal source plasma for
sale to third parties. Additionally, we own a plasma collection center in Beaumont, Texas, acquired in March
2021, which is registered with the
FDA and specializes in the collection of hyper-immune plasma for the manufacture of WINRHO SDF, KAMRHO
(D), KAMRAB and KEDRAB.
In addition, we are in the advanced stages of construction of our third plasma collection site in San Antonio,
Texas, which is expected to open by
the end of the first quarter of 2025. Each of the Houston and San Antonio collection centers, once
fully operational, is expected to contribute
annual revenues of $8 million to $10 million in sales of normal source plasma.
Distribution Segment
In the Distribution segment,
we leverage our expertise and presence in the Israeli biopharmaceutical market to distribute in Israel more than 25
pharmaceutical products,
exclusively licensed from international manufacturers. Sales generated by our Distribution segment during 2024 totaled $19.5
million,
as compared to $27.1 million and $26.7 million during 2023 and 2022, respectively. The decrease in revenues during 2024 is primarily the
result of
reduction in our sales of intravenous immunoglobulin (“IVIG”), sold in Israel as part of annual tenders of local
HMOs and hospitals, due to a significant
reduction in market prices for this product category and increased competition. Our gross profitability
in the Distribution segment decreased during 2024,
also affected by the reduction in IVIG sales, write-downs of remaining short dated
IVIG inventory and increased importation-related logistics costs due to
limitations in air travel to Israel during 2024.
44
As part of our Distribution
segment, we have licensed a portfolio of biosimilar products from multiple international companies for distribution in
Israel. We launched
the first product of this portfolio in Israel during the first quarter of 2024, generating $1.5 million in sales during 2024. Subject
to EMA
and subsequently IMOH approvals, two additional biosimilar products are expected to be launched during 2025 and the remaining biosimilar
products are
expected to be launched in Israel over the coming years, at a rate of 1-3 products per year, while continuing to explore
opportunities to in-license additional
biosimilar products and expand the portfolio. We believe that sales generated by the launch of
the biosimilar products will serve as a major growth and
profitability catalyst for our Distribution segment. We estimate that revenues
from the sales of our existing biosimilar products portfolio in Israel will
increase to between approximately $15 million to $20 million
within the next five years and will continue to grow thereafter, subject to the continued
launch of the entire portfolio as scheduled.
Strategic Transactions
We are actively seeking new
business development, in-licensing, collaboration, and/or M&A opportunities in 2025. These anticipated transactions
aim to leverage
our financial strength, enhance our marketed products portfolio and leverage synergies with our existing commercial operations. We are
targeting the acquisition or in-licensing of commercial products for distribution by us in markets we currently operate, particularly
the U.S. market. These
products may be plasma derived, allowing us to utilize manufacturing synergies, or non-plasma derived, leveraging
our commercial, marketing and
distribution capabilities to diversify our offerings and address a broader range of specialty, rare and
serious conditions. We may also explore manufacturing
services agreements to manufacture plasma-derived products for other companies,
which can provide additional revenue streams and leverage our expertise
in plasma-derived biopharmaceuticals.
Inhaled AAT Phase 3 Pivotal Study
In addition to our commercial
operation, we invest in research and development of new product candidates, targeting significant unmet medical
needs. Our leading investigational
product is Inhaled AAT for AATD, for which we are continuing to progress the InnovAATe clinical trial, a randomized,
double-blind, placebo-controlled,
pivotal Phase 3 trial. In January 2025, we announced that the FDA confirmed its agreement with our proposal to change
the two-sided Type
1 error rate control from 5% to 10% (p-value of 0.1) for the pivotal Phase 3 InnovAATe clinical trial. Based on this change in the p-
value,
as well as additional expected revisions to the study’s SAP, we plan to reduce the study sample size from 220 patients to approximately
180 patients,
while maintaining the trial’s statistical power. We plan to submit the revised SAP to the FDA and to conduct an interim
futility analysis for the InnovAATe
clinical study by the end of 2025. In addition, we are also seeking collaborations with potential
partners to bring this product to market. We have additional
product candidates in the early development stage. For additional information
regarding our research and development activities, see “— Our Development
Product Pipeline”.
2025 Financial Guidance
We currently expect to generate
total revenues for the fiscal year 2025 in the range of $178 million to $182 million and adjusted EBITDA in the
range of $38 million to
$42 million. The midpoint of the projected 2025 revenue and adjusted EBITDA forecast represents a year-over-year increase of
12% in revenues
and 17% in adjusted EBITDA. For details regarding the use of non-IFRS measures, see “Item 5. Operating and Financial Review and
Prospectus—Non-IFRS Financial Measures.”
Our Commercial Product Portfolio
Our commercial products portfolio
is comprised of our proprietary plasma-derived biopharmaceutical products in our Proprietary Products
segment, which are marketed and
sold directly or through strategic partners and local distributers in the United States, Canada, and various other
international markets,
and licensed products, some of which are plasma-derived, which are marketed and sold by us in our Distribution segment in Israel.
45
Proprietary Products Segment
Our products in the Proprietary
Products segment consist of plasma derived IgGs and protein therapeutics derived from human plasma, which are
administered by injection
or infusion. We also manufacture ASV products from equine based serum.
The following tables list
our Proprietary Products:
Product
Indication
Active Ingredient
KAMRAB/ KEDRAB
Prophylaxis of rabies disease
Anti-rabies immunoglobulin
(Human)
CYTOGAM
Prophylaxis of Cytomegalovirus (CMV) disease in kidney, lung, liver, pancreas,
heart and heart/lung transplants
Cytomegalovirus
Immunoglobulin Intravenous
(Human)
VARIZIG
Post-exposure prophylaxis of Varicella in high-risk individuals
Varicella Zoster Immunoglobulin
(Human)
WINRHO SDF
Immune thrombocytopenic purpura (ITP) and suppression of rhesus
isoimmunization (RH)
Rho(D) immunoglobulin
(Human)
HEPAGAM B
Prevention of Hepatitis B recurrence liver transplants and post-exposure
prophylaxis
Hepatitis B immunoglobulin
(Human)
GLASSIA (or
VENTIA/RESPIKAM in certain
countries)
Intravenous AATD
Alpha-1 Antitrypsin (Human)
KAMRHO (D) IM
Prophylaxis of hemolytic disease of newborns
Rho(D) immunoglobulin
(Human)
Echis coloratus Antiserum,
Vipera palaestinae Antiserum
Treatment of snake bites by the Vipera palaestinae and the Echis coloratus
Anti-snake venom
Proprietary Products
KAMRAB/KEDRAB
KAMRAB is a hyper-immune plasma-derived
therapeutic for prophylactic treatment against rabies infection that is administered to patients after
exposure to an animal suspected
of being infected with rabies. KAMRAB is manufactured at our manufacturing facility in Beit Kama, Israel from plasma
that contains high
levels of antibodies from donors that were previously vaccinated by an active rabies vaccine. KAMRAB is administered by a one-time
injection,
and the precise dosage is a function of the patient’s weight (20 IU/kg).
According to WHO, rabies is
estimated to cause 59,000 human deaths annually in over 150 countries and each year more than 29 million people
worldwide receive a post-bite
rabies vaccination, which is estimated to prevent hundreds of thousands of rabies deaths annually. The U.S. Centers for
Disease
Control and Prevention (CDC) recommends that post-exposure prophylaxis (“PEP") treatment for people who have never been vaccinated
against
rabies previously should always include administration of both HRIG and rabies vaccine. According to the CDC, the combination
of HRIG and vaccination
is recommended for both bite and non-bite exposures, regardless of the interval between exposure and initiation
of treatment.
In July 2011, we entered into
a strategic supply and distribution agreement with Kedrion, as amended from time to time, for the clinical
development and marketing in
the United States of KAMRAB. See “— Strategic Partnerships — Kedrion (KEDRAB and Other Products Distributed in
Israel).”
Based on the results of a phase 2/3 clinical study, in August 2017, we received FDA approval for the marketing of KAMRAB in the United
States
for PEP against rabies infection, and in April 2018 we, together with Kedrion, launched the product in the United States under
the trademark KEDRAB.
46
In June 2021, the FDA approved
a label update for KEDRAB, establishing the product’s safety and effectiveness in children aged 0 to 17 years.
The updates to the
KEDRAB label were based on data from the KEDRAB U.S. post-marketing pediatric study, the first and only clinical trial to establish
pediatric
safety and effectiveness of any HRIG in the United States. The KEDRAB U.S. pediatric trial was conducted at two sites, one in Arkansas
and
another in Rhode Island. The study included 30 pediatric patients (ages 0-17 years old), each of whom received KEDRAB as part of PEP
treatment
following exposure or suspected exposure to an animal suspected or confirmed to be rabid, and safety follow-up was conducted
for up to 84 days. The
primary objective of the study was to confirm the safety of KEDRAB in the pediatric population. Secondary objectives
included the evaluation of antibody
levels and the effectiveness of KEDRAB in the prevention of rabies disease when administered with
a rabies vaccine according to the PEP recommended
guidelines. No serious adverse events were observed during the study. No incidence of
rabies disease or deaths were recorded throughout the 84-day study
period.
In December 2023, we entered into a binding memorandum of understanding
with Kedrion for the amendment and extension of the distribution
agreement between the parties, which represents the largest commercial
agreement secured by us to date. Subsequently, in January 2025, we entered into
the fifth amendment to the supply and distribution agreement,
which memorializes the agreements and undertakings set forth in the binding memorandum
of understanding, along with additional terms and
conditions. Under these agreements, Kedrion committed to purchasing minimum quantities of KEDRAB
during the first four years (i.e., 2024
through 2027) of the eight-year term that began in January 2024, generating projected minimum aggregate revenues
for us of approximately
$180.0 million over such four-year period of which a minimum of approximately $135.0 million is to be acquired during the
remaining three
years of such four-year period (i.e., 2025 through 2027). Our revenues from sales of KEDRAB to Kedrion during 2024 totaled $50.0
million
as compared to $32.8 million and $16.2 million during 2023 and 2022, respectively. Such increase in 2024 and 2023 reflects the increased
demand
for KEDRAB in the U.S. market, as well as the improved financial terms under the 2025 amendment to the supply and distribution
agreement. KEDRAB’s
in-market sales in the United States grew significantly in 2024 and 2023. The distribution and supply agreement,
as amended, includes the potential
expansion of KEDRAB distribution by Kedrion to other territories beyond the United States.
In December 2024, we secured
an agreement to supply KAMRAB to an international organization, which also serves as Regional Office for the
WHO, for further distribution
in Latin America through the years 2025-2027.
CYTOGAM
CYTOGAM (CMV-IGIV) is indicated for CMV disease associated with the transplantation of the kidney, lung, liver,
pancreas and heart.
CYTOGAM, approved by the FDA in 1998, is the sole FDA-approved IgG product for this indication, and was acquired by
us from Saol in November
2021.
CYTOGAM is administered
within 72 hours after transplantation and then in weeks 2, 4, 6, 8, 12 and 16 after transplantation. The precise dosage
is adjusted
according to the patient’s weight. CMV seroprevalence in the United States is estimated at 75% among adults. CMV is typically
passed through
direct personal contact. A seropositive status indicates exposure to the virus and development of antibodies against
CMV. After initial infection, CMV
establishes lifelong latency in the host. Immunocompetent individuals possess adequate immunity to
protect them from infection and clinical symptoms,
whereas immunocompromised patients, such as solid organ transplant patients, are
vulnerable to both de novo primary and reactivation CMV infections. In
the case of a solid organ transplant, CMV seronegative
recipients (recipient negative (R-)) receiving CMV seropositive organs (donor positive (D+)) have
the highest risk of CMV infection
and disease. The weighted average incidence of CMV disease from clinical trials with current preventative strategies in
CMV D+/R-
patients has been reported as 25% in kidney 13% in liver, 15% in lung, and 10% in heart transplant recipients. Investigational
studies have
shown that administration of CMV-IGIV is associated with neutralization of free CMV particles and immunomodulation that
may attenuate and reduce the
incidence of CMV disease post-transplant as part of a prophylactic regimen that includes concomitant
anti-viral therapy.
Based on the Organ Procurement
and Transplantation Network, more than 48,000 solid organ transplant procedures were performed in the United
States in 2024. Transplantation
numbers have grown as a result of increasing and more effective usage of organs from less traditional donors, including
older individuals
and people who have died of cardiorespiratory failure. Several available antivirals (ganciclovir and valganciclovir) are being used and
are
considered standards of care for the prevention of CMV infection in high-risk patients. As CMV infection in immunocompromised solid
organ transplant
patients can be severe and life-threatening, we believe that administration of CYTOGAM together with the available antivirals
may provide additional
protection in preventing CMV disease for certain high-risk transplant populations, such as lung and heart transplant,
due to its complementary mechanism
of action to antiviral drug therapy. We believe there is an under-utilization of CYTOGAM as CMV prophylaxis
in CMV high-risk patients, including due to
the lack of systematic data generation. We are currently advancing an ongoing clinical program,
which includes prospective investigator-initiated studies,
aimed at highlighting the benefits of CYTOGAM and identifying potential innovative
applications. Through our continuous efforts to communicate new
and existing clinical data on CYTOGAM, including the benefits of combination
of CYTOGAM and antiviral therapy, we aim to achieve increased
utilization of CYTOGAM.
47
In October 2023, the results
of an investigator-initiated five-year retrospective study, conducted by Fernando Torres M.D., Clinical Chief, Division
of Pulmonary and
Critical Care at University of Texas Southwestern Medical Center, consisting of 325 lung-transplant patients, evaluating the real-world
use of CYTOGAM in combination with anti-viral agents for the prevention of CMV disease in high-risk CMV mismatch lung transplant recipients
(CMV
seronegative patients receiving a lung from a seropositive donor), were presented at IDWeek 2023, in Boston, Massachusetts. Dr. Torres
concluded his
presentation by indicating that the use of a proactive multimodality CMV prophylaxis consisting of antivirals and immune
augmentation with CMV
immunoglobulin may improve outcomes among high-risk CMV mismatch lung transplant recipients.
CYTOGAM is registered and
sold primarily in the United States and Canada. We are currently engaging KOLs in the United States for scientific
knowledge exchange
and to support further research of CYTOGAM, primarily in the form of investigator-initiated studies, including a prospective,
randomized,
multicenter study. In November 2024, the second annual Kamada Scientific Advisory Board, consisting of eight U.S.-based renowned thought
leaders in CMV and solid organ transplant, was held, during which the current landscape for CMV management in transplantation was reviewed,
including
challenges and potential opportunities for CYTOGAM, the U.S. clinical program, future potential research and development possibilities,
and educational
efforts for 2025.
CYTOGAM is manufactured at
our facility in Beit Kama, Israel has been available for commercial sale in the United States since October 2023,
following FDA approval
of the technology transfer to manufacture CYTOGAM at our facility, which was obtained in May 2023. We had initially received
FDA acknowledgment
for the transfer of the ownership of the U.S. BLA for CYTOGAM in September 2022 and during December 2022, we submitted an
application
to the FDA, as a prior approval supplement (PAS), to manufacture CYTOGAM at the Beit Kama facility. The FDA approval represents the
successful
conclusion of the technology transfer process of CYTOGAM from the previous manufacturer, CSL Behring. During the fourth quarter of 2023,
CYTOGAM manufactured at our facility in Beit Kama was shipped to Canada for the first time, following Health Canada’s approval to
manufacture
CYTOGAM at our facility, which was obtained in July 2023. We had initially obtained approval from Health Canada for the transfer
of the drug
identification number (“DIN”) for CYTOGAM in June 2022 and in January 2023, we submitted a technology transfer
application to Health Canada.
Total revenues from sales
of CYTOGAM for the years ended December 31, 2024, 2023 and 2022, were $22.5 million, $17.2 million and $22.6
million, respectively. Revenues
generated by CYTOGAM during 2024 reflect a return to the levels experienced in 2022. We believe that our ongoing
clinical and medical
affairs activities, which include collaborations with leading U.S-based solid organ transplantation experts, to generate and present new
real-world data on the benefits of CYTOGAM, as well as planned prospective investigator-initiated studies evaluating the benefits and
potential innovative
uses of CYTOGAM, will continue to raise awareness for CYTOGAM. These efforts aim to explore new approaches to current
clinical practices in CMV
prevention in solid organ transplantation, which are expected to support sustained sales growth for CYTOGAM.
We believe that the decline in CYTOGAM
sales in 2023 compared to 2022 was primarily due to inventory management by wholesalers during
the first nine months of the year, until new batches of
CYTOGAM manufactured at our Israeli facility became available, commencing during
the fourth quarter of 2023.
GLASSIA
GLASSIA is an intravenous
AAT product produced from plasma, that is indicated by the FDA for chronic augmentation and maintenance therapy
in adults with emphysema
due to congenital AATD. AAT is a naturally occurring protein found in a derivative of plasma known as fraction IV. AAT
regulates the activity
of certain white blood cells known as neutrophils and reduces cell inflammation. Patients with genetic AATD suffer from a chronic
inflammatory
state, lung tissue damage and a decrease in lung function. While GLASSIA does not cure AATD, it supplements the patient’s insufficient
physiological levels of AAT and is administered as a chronic treatment. As such, the patient must take GLASSIA indefinitely over the course
of his or her
life, in order to maintain the benefits provided by it. GLASSIA is administered through a single weekly intravenous infusion.
In the United States and Europe,
we believe that AATD is currently significantly under-diagnosed and under-treated. Based on information
published by the Alpha-1 Foundation,
there are approximately 100,000 people with AATD in the United States and about the same number in Europe, and
we estimate, based on medical
literature, that less than 10% of all potential cases of AATD are treated. We believe that the primary reasons for this
significant gap
in the United States and Europe are under diagnosis of patients suffering from AATD, the absence of insurance reimbursement in various
European countries, lengthy and complicated regulatory and reimbursement processes required to commence sales of AAT products in new markets.
Similar reasons limit the diagnosis and usage of AATD treatment in other territories outside of the U.S. and Europe. We expect the number
of patients
treated for AATD to continue to increase going forward as awareness of AATD increases and given that a number of European
countries have recently
approved reimbursement for treatment of AATD, we believe that additional European countries will approve such
reimbursement during the coming years.
Based on a market analysis report published in 2023 by Cantor Fitzgerald, the global AATD augmentation
therapy market is expected to grow at a
compound annual growth rate of 7.2% at least through 2032.
48
The estimated annual cost
of treatment in the United States is between $80,000 and $120,000 per each AATD patient, depending on the patient’s
body weight. In the
United States, in some of the European countries and in Israel, Argentina and Russia we believe that most of the cost of treatment is
covered by medical insurance programs.
GLASSIA was the first FDA-approved
liquid AAT, which is ready for infusion and does not require reconstitution and mixing before infusion, as
is required from most other
competing products. Additionally, in June 2016, the FDA approved an expanded label of GLASSIA for self-infusion at home
after appropriate
training. GLASSIA has a number of advantages over other lyophilized intravenous AAT products, including the reduction of the risk of
contamination
during the preparation and infection during the infusion, reduced potential for allergic reactions due to the absence of stabilizing agents,
simple and easy use by the patient or nurse, and the possible reduction of the nurse’s time during home visits, in the clinic or
in the hospital and the ability
of some of the patients to self-infuse at home.
GLASSIA obtained FDA approval
in July 2010 and sales commenced in October 2010. As part of the approval, the FDA requested that we
conduct post-approval Phase 4 clinical
trials, as is common in the pharmaceutical industry, aimed at collecting additional safety and efficacy data for
GLASSIA. According to
our agreement with Takeda (See “— Strategic Partnerships — Takeda (Glassia)”), the Phase 4 clinical trials are
financed and
managed by Takeda, provided that if the cost of such Phase 4 clinical trials exceeds a pre-defined amount, we will participate
in financing such trial up to a
certain amount by offsetting such amounts from future royalties due from Takeda. The first Phase 4 safety
study completed enrollment of a total of 30
subjects in the United States and Canada during 2020 and its clinical study report was completed
and was submitted to the FDA in 2022. The second Phase
4 efficacy study was initiated during 2016 and was terminated two years after initiation
based on the DSMB’s recommendation due to very low recruitment
rates. In 2019, Takeda submitted a revised Phase 4 protocol to the
FDA. Following several interactions with the FDA with respect to the Phase 4 efficacy
study requirements, Takeda decided not to continue
to pursue the study, and the current study status with the FDA is delayed.
The majority of GLASSIA sales are in the United States, and, commencing
in 2024, GLASSIA is also sold in Canada. Sales of GLASSIA in the
United States and in Canada are made by Takeda through our companies’
strategic partnership. Since March 2022, we have been receiving royalties on
GLASSIA sales manufactured by Takeda in the United States,
and, commencing in 2024, in Canada. We will be entitled to royalty income on sales of
GLASSIA by Takeda in Australia and New Zealand,
to the extent that GLASSIA will be approved, and sales will be generated in these markets by Takeda
in the future. The royalty income
is at a rate of 12% on net consolidated sales (in all applicable territories) through August 2025, and at a rate of 6%
thereafter, until
2040, with a guaranteed minimum of $5 million annually from 2022 to 2040. Through 2021, we generated revenues from sales of
GLASSIA, manufactured
by us, to Takeda for further distribution in the United States. During 2021, Takeda completed the technology transfer of
GLASSIA manufacturing
to its facility in Belgium, received the required FDA approval, and began its own production of GLASSIA for the U.S. market.
In addition,
Takeda obtained a marketing authorization approval for GLASSIA from Health Canada in 2021. In December 2023, Takeda announced that it
entered into a two-year contract with the CBS for the supply of GLASSIA, which commenced in early 2024. In 2024, we recognized $16.9 million
in sales-
based royalty income from Takeda, as compared to $16.1 million and $12.2 in 2023 and 2022, respectively. In 2022, we also recognized
a $2.0 million one-
time payment on account of the transfer of the GLASSIA U.S. BLA to Takeda. Based on current GLASSIA sales and forecasted
future growth, we expect
annual royalties on sales of GLASSIA by Takeda in the range of $10 million to $20 million per year for 2025 to
2040.
We also market GLASSIA in
other counties, mainly Argentina, Russia, Israel and, more recently, in Switzerland (in some of these markets under a
different brand
name), through local distributors. Total revenues derived from GLASSIA sales in these other countries during 2024 was $15.2 million, as
compared to $7.4 million and $5.9 million during 2023 and 2022, respectively. These ex-U.S. market GLASSIA sales generated a gross margin
exceeding
40% for the year ended December 31, 2024. The revenue increase in 2024 in comparison to 2023 and 2022 is due to patients newly
diagnosed with AATD
receiving GLASSIA treatment, as well as favorable market conditions and pricing terms with our distributors. In May
2023, Swissmedic, the national
authorization and supervisory authority for drugs and medical products in Switzerland, granted marketing
authorization for GLASSIA for AATD in
Switzerland. We have partnered with the IDEOGEN Group, a company focused on the commercialization
of specialty medicines for rare diseases across
Europe, for the commercialization of GLASSIA in Switzerland, and GLASSIA was commercially
launched in Switzerland in December 2023, upon
obtaining the required reimbursement coverage.
WINRHO SDF
WINRHO SDF is a Rho(D) Immune
Globulin Intravenous (Human) product indicated for use in clinical situations requiring an increase in platelet
count to prevent excessive
hemorrhage in the treatment of non-splenectomies, for Rho(D)-positive children with chronic or acute immune
thrombocytopenic purpura (“ITP”),
adults with chronic ITP, and children and adults with ITP secondary to HIV infection. WINRHO SDF is also used for
suppression of Rhesus
(Rh) Isoimmunization during pregnancy and other obstetric conditions in non-sensitized, Rho(D)-negative women. WINRHO SDF,
approved by
the FDA in 1995, was acquired by us from Saol in November 2021.
49
ITP is a blood disorder characterized
by a decrease in the number of platelets – the cells that help blood clot. Findings published during 2019
suggest that nearly 20,000
children and adults are newly diagnosed with ITP each year in the United States. Rho(D) immunoglobulin is an effective option
for rapidly
increasing platelet counts in patients with symptomatic ITP.
Hemolytic Disease of the Newborn
(“HDN”) is a blood disorder in a fetus or newborn infant. In some infants, it can be fatal. During pregnancy,
Red Blood Cells
(“RBCs”) from the unborn baby can cross into the mother’s blood through the placenta. HDN occurs when the immune system
of the
mother sees a baby’s RBCs as foreign. Antibodies then develop against the baby’s RBCs. These antibodies attack the
RBCs in the baby’s blood and cause
them to break down too early. Rho(D) immunoglobulin is administered to Rh-negative pregnant women
as prophylactic therapy, to prevent the disease.
In the U.S. market, WINRHO
SDF is primarily used for the treatment of ITP. Following an FDA black box warning for Intravascular Hemolysis
(IVH) issued in 2011, as
well as the introduction of new ITP therapies, its sales in the U.S. market declined significantly between 2011 to 2017 and have
since
remained relatively flat. Currently, WINRHO SDF competes in the U.S. market with other ITP treatments, including TPO-RA agents (e.g.,
Eltrombopag), corticosteroids, IVIG and splenectomy. In 2024 WINRHO SDF was extensively used for the first time in the United States to
treat HDN due
to a shortage of competing products. This shortage was resolved by the fourth quarter of 2024, leading to a return of its
primary use for ITP treatment.
We obtained FDA acknowledgment
for the transfer of the ownership of the BLA for WINRHO SDF in September 2022. The ownership transfer of
the DIN for WINRHO was approved
by Health Canada in June 2022. We have obtained approval for the transfer of registration ownership of the product in
all other applicable
territories, other than Hong Kong, where the process is ongoing.
WINRHO SDF is currently manufactured
by Emergent under a contract manufacturing agreement assigned to us by Saol upon the consummation
of the acquisition. We expect to continue
manufacturing the product with Emergent in the foreseeable future and are planning to initiate a technology
transfer to transition the
manufacturing of WINRHO SDF to our facility in Beit Kama, Israel. Such a technology transfer would be subject to entering into
a new amended
manufacturing services agreement with Emergent, covering operational aspects and technology transfer related services. We anticipate that,
once initiated, such technology transfer could be completed within four to five years.
Our KAMRHO (D) is a comparable
product to WINRHO SDF and is approved for HDN in various international markets. The two products are
registered and distributed in different
markets.
HEPAGAM B
HEPAGAM B is a hepatitis B
Immune Globulin (Human) (HBIG) product indicated to both prevent hepatitis B virus (HBV) recurrence following
liver transplantation in
hepatitis B surface antigen positive (HBsAg- positive) patients and to provide PEP treatment. HEPAGAM B, which was approved
by the FDA
in 2006 for PEP and in 2007 as a prevention therapy, was acquired by us from Saol in November 2021.
Liver transplantation is the
treatment of choice for patients with end-stage liver disease secondary to chronic hepatitis B. However, liver
transplantation is complicated
by the risk of recurrent hepatitis B virus infection, which significantly impairs graft and patient survival. Prevention of
hepatitis
B virus (HBV) reinfection includes use of antiviral therapy, with the addition of hepatitis B immune globulin. HBIG treatment is based
upon the
rationale that administered antibody will bind to and neutralize circulating virions, thereby preventing graft infection.
In the U.S. market, HEPAGAM
B is primarily used for post-transplant prophylaxis, where it competes with Nabi-HB, a product of ADMA. We
believe that our ongoing registration
and marketing activities in additional countries, will support the continued usage of HEPAGAM B in ex-U.S. markets.
We received FDA acknowledgment
for the transfer of the ownership of the BLA for HEPAGAM B in September 2022. Health Canada approved
the DIN ownership transfer in October
2022. We have obtained approval for the transfer of registration ownership of the product in all other applicable
territories.
50
HEPAGAM B is currently manufactured
by Emergent under a contract manufacturing agreement assigned by Saol upon the consummation of the
acquisition. We expect to continue
manufacturing the product with Emergent in the foreseeable future and are planning to initiate a technology transfer to
transition the
manufacturing of HEPAGAM B to our facility in Beit Kama, Israel. Such a technology transfer would be subject to entering into a new
amended
manufacturing services agreement with Emergent, covering operational aspects and technology transfer related services. We anticipate that,
once
initiated, such technology transfer could be completed within four to five years.
VARIZIG
VARIZIG (Varicella Zoster
Immune Globulin (Human)) is a product that contains antibodies specific for Varicella-zoster virus (“VZV”), and it is
indicated
for post-exposure prophylaxis of varicella (chickenpox) in high-risk patient groups, including immunocompromised children, newborns, and
pregnant women. VARIZIG is intended to reduce the severity of chickenpox infections in these patients. The CDC recommends Varicella zoster
immune
globulin (human) (such as VARIZIG) for post-exposure prophylaxis of varicella for persons at high-risk for severe disease who lack
evidence of immunity
to varicella. VARIZIG, approved by the FDA in 2012, is the sole FDA-approved IgG product for this indication, and
was acquired by us from Saol in
November 2021.
VZV causes varicella (chicken
pox) and herpes zoster (shingles). Varicella is a common childhood illness. Herpes zoster is caused by the
reactivation of VZV. The incidence
of herpes zoster increases with age or immunosuppression. Individuals at highest risk of developing severe or
complicated varicella include
immunocompromised individuals, preterm infants, and pregnant women. It has been demonstrated that administering
VARIZIG post-exposure
to VZV is associated with low rates of varicella in high-risk patients and reduces severity of varicella in immunocompromised
children
and adults.
We received FDA acknowledgment
for the transfer of the ownership transfer of the BLA for VARIZIG in September 2022. Health Canada
approved the DIN ownership transfer
in June 2022.
VARIZIG is currently manufactured
by Emergent under a contract manufacturing agreement assigned by Saol upon the consummation of the
acquisition. We expect to continue
manufacturing the product with Emergent in the foreseeable future and are planning to initiate a technology transfer to
transition the
manufacturing of VARIZIG to our facility in Beit Kama, Israel. Such a technology transfer would be subject to entering into a new amended
manufacturing services agreement with Emergent, covering operational aspects and technology transfer related services. We anticipate that,
once initiated,
such technology transfer could be completed within four to five years.
In July 2022, we secured an
$11.4 million agreement to supply VARIZIG to an international organization, which also serves as the Regional
Office for the WHO, for
further distribution across Latin America. The product was supplied under this agreement from the fourth quarter of 2022 through
the first
half of 2023. In December 2024, we were awarded a tender to supply VARIZIG to such international organization for distribution across
Latin
America for the years 2025-2027.
In October 2022, we were awarded
an extension of an existing tender from CBS, which manages the supply of blood and plasma products across
all Canadian provinces and territories,
excluding Quebec, for the supply of the four IgG products, CYTOGAM, HEPAGAM, VARIZIG and WINRHO
SDF, for an additional three years, commencing
on April 1, 2023, for an approximate total value of $22.0 million, securing the continued sales of those
products in the Canadian market.
We have an option to extend the agreement for up to two additional years. In Quebec, we supply CYTOGAM,
HEPAGAM, VARIZIG and WINRHO SDF
under an agreement with Hema-Quebec, initially assigned to us from Saol. In March 2024, we entered into a
renewed agreement with
Hema-Quebec for CYTOGAM, HEPAGAM, and VARIZIG, for a period of three years, commencing April 2024, and have an
option to extend the agreement
for up to two additional years. The agreement with Hema-Quebec for WINRHO SDF was extended through March 2026.
Our revenues from sales
of these products in Canada, under both the CBS and Hema-Quebec agreements, totaled $7.5 million for the year ended December
31, 2024,
as compared to $9.1 million and $9.6 million during 2023 and 2022, respectively.
KAMRHO (D)
KAMRHO (D), similar to WINRHO SDF, is indicated for the prevention
of HDN. In some infants, it can be fatal. During pregnancy, RBCs from
the fetus can cross into the mother’s blood through the placenta.
HDN occurs when the immune system of the mother sees a fetus’ RBCs as foreign.
Antibodies then develop against the fetus' RBCs.
These antibodies attack the RBCs in the fetus' or newborn's blood and cause them to break down too
early. Rho(D) immunoglobulin is administered
to Rh-negative pregnant women as prophylactic therapy, to prevent the disease. KAMRHO (D) is produced
from hyper-immune plasma and is
administered through intra-muscular injection (KAMRHO (D) IM).
SNAKE BITE ANTISERUM
Our snake bite antiserum products
are used for the treatment of people who have been bitten by the most common Israeli Viper (Vipera
palaestinae) and by the Israeli
Echis (Echis coloratus). The venom of these snakes is poisonous and causes, among other symptoms, severe immediate pain
with rapid
swelling. These snake bites can lead to death if left untreated. Our snake bite antiserum products are produced from hyper-immune serum
that
has been derived from horses that were immunized against Israeli Viper and Israeli Echis venom. These products are the only treatment
in the Israeli
market for Vipera palaestinae and Echis coloratus snake bites.
51
We manufacture snake bite
antiserums pursuant to an agreement with the IMOH, initially entered into in March 2009, and extended and amended
in November 2022, December
2023 and December 2024. The parties are currently discussing an extension of the agreement until the end of 2025, with an
option to the IMOH
to further extend the term of the agreement with a 90-day prior notice. We anticipate finalizing such discussions in the coming weeks.
The agreement with the IMOH was initially entered into following a tender that we won, and the extension of the agreement was under an
exemption from
a tender. We completed construction of the production facilities and laboratories for the product in accordance with the
agreement and successfully passed
the IMOH inspections. We began production of our snake bite antiserums in August 2011 and commenced
sales to the IMOH in 2012. Under the agreement
and subject to its terms, the IMOH has undertaken to purchase from us, and we have undertaken
to supply the IMOH, a minimum quantity of snake bite
antiserums each year during the term of the agreement.
Plasma Collection
As part of our strategy of
evolving into a fully integrated specialty plasma company, we established Kamada Plasma LLC, a wholly owned
subsidiary, which operates
our plasma collection operations in the United States. In March 2021, we acquired a plasma collection center registered with the
FDA and
certain related assets from the privately held B&PR based in Beaumont, Texas, which initially specialized in the collection of hyper-immune
plasma used in the manufacture of Rho(D) immunoglobulin, such as KAMRHO (D). In October 2022, we significantly expanded our hyper-immune
plasma collection at this center by obtaining FDA approval for the collection of hyper-immune plasma to be used in the manufacture of
KAMRAB and
KEDRAB, which is plasma that contains high levels of antibodies from donors previously vaccinated with an active rabies vaccine,
and we started
collections of such plasma at the center during 2023. The plasma collection center in Beaumont passed inspections by the
FDA in January 2024 with no
critical observations.
In March 2023, we entered
into a lease agreement for a facility in Houston, Texas, and in September 2024, following the completion of its
construction and obtaining
the required site registration, we commenced operations at that facility. To obtain FDA approval for the collection operations at
the
Houston site, we submitted a prior approval supplement to the FDA for the site at the beginning of 2025. The Houston center is expected
to become one
of the largest specialty plasma collection sites in the United States and is already collecting normal source plasma for
sale to third parties. In addition, in
May 2024, we entered into a lease agreement for a facility in San Antonio, Texas, and subsequently
initiated construction activities to establish our third
plasma collection center at that facility. We expect to commence plasma collection
operations at the new San Antonio center by the end of the first quarter
of 2025. To obtain FDA approval for the site collection operations
at the San Antonio site, we expect to submit a prior approval supplement to the FDA for
the site in the second half of 2025. We also intend
to apply for EMA approval of both the Houston and San Antonio plasma collection centers to enable
future sales of normal source plasma
to potential European customers.
We believe that the expansion
of our plasma collection capabilities will enable us to better support our hyper-immune plasma needs and lower
manufacturing costs, as
well as generate additional revenues through sales of collected normal source plasma to third parties. Each of the Houston and San-
Antonio
collection centers, once fully operational, is expected to contribute annual revenues of $8 million to $10 million in sales of normal
source plasma.
Distribution Segment
Our Distribution segment is
comprised of marketing and sales in Israel of biopharmaceutical products exclusively licensed for distribution in
Israel from leading
international pharmaceutical manufacturers. We engage third-party pharmaceutical companies, register their products with the IMOH,
import
the products to Israel, and market, sell and distribute them to local HMOs, hospitals and pharmacists. Our primary products in the Distribution
segment include pharmaceuticals for critical care delivered by injection, infusion or inhalation. Sales generated by our Distribution
segment during 2024
totaled $19.5 million, as compared to $27.1 million and $26.7 million during 2023 and 2022, respectively, and accounted
for approximately 12%, 19% and
21% of our total revenues for the years ended December 31, 2024, 2023 and 2022, respectively. The decrease
in revenues during 2024 is primarily due to a
reduction in our sales of IVIG, which is sold in Israel as part of annual tenders of local
HMOs and hospitals. This reduction resulted from a significant
decrease in market prices for this product category and increased market
competition. Our gross profitability in the Distribution segment decreased during
2024, also affected by the reduction in IVIG sales,
write-downs of remaining short-dated IVIG inventory, and increased importation-related logistics costs
due to limitations in air travel
to Israel during 2024.
Over the past several years,
we have continued to expand our Distribution segment products portfolio to non-plasma derived products, including
licensing a portfolio
of biosimilar products from multiple international companies for distribution in Israel. During the first quarter of 2024, we successfully
completed the Israeli launch of our first biosimilar product, BEVACIZUMAB KAMADA, the biosimilar to Avastin, which is indicated for the
treatment of
certain types of cancer, including colon cancer, non-small cell lung cancer and metastatic breast cancer and generated $1.5
million of sales during 2024
from this product. Subject to EMA and subsequently IMOH approvals, two additional biosimilar products are
expected to be launched in Israel in 2025 and
the remaining biosimilar products are expected to be launched in Israel over the coming
years, at a rate of 1-3 products per year, while continuing to
explore opportunities to in-license additional biosimilar products and
expend the portfolio. We believe that sales generated by the launch of the biosimilar
products will serve as a major growth and profitability
catalyst for our Distribution segment. We estimate that revenues from the sales of our existing
biosimilar products portfolio in Israel
will increase to between approximately $15 million to $20 million within the next five years and will continue to
grow thereafter, subject
to the continued launch of the entire portfolio as scheduled.
52
The following table sets forth
the products in our Distribution segment that are currently distributed by us in the Israeli market.
Product
Indication
Active Ingredient
Respiratory
BRAMITOB
Management of chronic pulmonary infection due to pseudomonas aeruginosa in
patients six years and older with cystic fibrosis
Tobramycin
FOSTER
Regular treatment of asthma where use of a combination product (inhaled
corticosteroid and long-acting beta2-agonist) is appropriate
Beclomethasone dipropionate,
Formoterol fumarate
TRIMBOW
Maintenance treatment in adult patients with moderate to severe chronic obstructive
pulmonary disease (COPD) with Asthma Maintenance treatment of asthma
Beclomethasone dipropionate,
Formoterol fumarate,
Glycopyrronium as bromide
PROVOCHOLINE
Diagnosis of bronchial airway hyperactivity in subjects who do not have clinically
apparent asthma
Methacholine Chloride
AEROBIKA
OPEP device
None
RUPAFIN
Symptomatic treatment of Allergic rhinitis and Urticaria
Rupatadine
RUPAFIN ORAL SOLUTION
Symptomatic treatment of allergic rhinitis in children aged 2 to 11 years and
urticaria in children aged 2 to 11 years
Rupatadine
SINTREDIUS
Rheumatoid arthritis, systemic lupus erythematosus, mild-moderate juvenile
dermatomyositis. Severe or debilitating allergic conditions, not treatable in a
conventional manner such as: bronchial asthma in children, bronchial asthma in
adults. Sarcoidosis in children and for maintenance therapy in adults. Acquired
haemolytic anaemia.
Prednisolone as Sodium
Phosphate
Immunoglobulins
IVIG
Treatment of various immunodeficiency-related conditions
Gamma globulins (IgG) (human)
VARITECT
Preventive treatment after exposure to the virus that causes chicken pox and zoster
herpes
Varicella zoster immunoglobulin
(human)
ZUTECTRA
Prevention of hepatitis B virus (HBV) re-infection in HBV-DNA negative patients
6 months after liver transplantation for hepatitis B induced liver failure
Hepatitis B immunoglobulin
(human)
HEPATECT CP
Prevent contraction of Hepatitis B by adults and children older than two years
Hepatitis B immunoglobulin
(human)
MEGALOTECT CP
Contains antibodies that neutralize CMV viruses and prevent their spread in
immunologically impaired patients
CMV immunoglobulin (human)
RUCONEST
Treatment of acute angioedema attacks in adults with hereditary angioedema (HAE)
due to C1 esterase inhibitor deficiency
Conestat Alfa
Critical Care
HEPARIN SODIUM INJECTION Treatment of thrombo-embolic disorders such as deep vein thrombosis, acute
arterial embolism or thrombosis, thrombophlebitis, pulmonary embolism, fat
embolism. Prophylaxis of deep vein thrombosis and thromboembolic events
Heparin sodium
ALBUMIN and ALBUMIN
Maintains a proper level in the patient’s blood plasma
Human serum Albumin
Coagulation Factors
Factor VIII
Treatment of Hemophilia Type A diseases
Coagulation Factor VIII (human)
53
Product
Indication
Active Ingredient
Factor IX
Treatment of Hemophilia Type B disease
Coagulation Factor IX (human)
COAGADEX
Treatment specifically for hereditary factor X deficiency
Coagulation factor X
Vaccinations
IXIARO
Active immunization against Japanese encephalitis in adults, adolescents, children
and infants aged 2 months and older
Japanese encephalitis purified
inactivated vaccine
VIVOTIF
Immunization against disease caused by Salmonella Typhi
Typhoid vaccine live oral
Metabolic Disease
PROCYSBI
Nephropathic cystinosis in adults and children 1 year of age and older
Cysteamine Biartrate
LAMZEDE
Treatment of alpha-mannosidosis
Velmanase alfa
RYPLAZIM
Treatment of patients with plasminogen deficiency type 1 (hypoplasminogenemia) Plasminogen, human-tvmh)
Oncology
ELIGARD
Management of advanced prostate cancer
Leuprolide acetate
BEVACIZUMAB KAMADA
A monoclonal antibody medication used to treat a number of types of cancers and a
specific eye disease for cancer. It is given by slow injection into a vein
(intravenous) and used for colon cancer, lung cancer, ovarian cancer, glioblastoma,
and renal-cell carcinoma
Bevacizumab
Our Development Product Pipeline
Our research and development
activities include conducting pre-clinical and clinical trials for new product candidates, as well as other
development activities for
our Proprietary Products pipeline, including improving existing products and processes, conducting development work at the
request of
regulatory authorities and strategic partners, and communicating with regulatory authorities regarding our commercial products and clinical
and
development programs. We incurred approximately $15.2 million, $13.9 million and $13.2 million in research and development expenses
in the years
ended December 31, 2024, 2023 and 2022, respectively.
We are currently in various
stages of pre-clinical and clinical development of new product candidates within our Proprietary Products segment.
Inhaled Formulations of AAT for AATD
We are continuing the clinical
development of our inhaled formulation of AAT administered using a nebulizer. The nebulizer was developed by
PARI. Inhaled AAT for AATD
has been designated as an orphan drug for the treatment of AATD in the United States and Europe.
We have been able to leverage
our expertise gained from the production of GLASSIA to develop a stable, high-purity Inhaled AAT product
candidate for the treatment of
AATD. Existing approved treatment for AATD requires weekly intravenous infusions of AAT therapeutics. We believe that
Inhaled AAT for
AATD, if approved, will increase patient convenience and reduce or replace the need for patients to use intravenous infusions of AAT
products,
decreasing the need for clinic visits or nursing home visits, improving the patient’s quality of life and reducing medical costs.
If approved,
Inhaled AAT for AATD is expected to be the first AAT product that is not required to be delivered intravenously and instead
is administered non-invasively
by inhalation once daily.
The current standard care
for AATD in the United States and in certain European countries, as well as in some additional international markets, is
a weekly IV infusion
of an AAT therapeutic. We estimate that only 2% of the AAT dose reaches the lung when administered intravenously. We have
conducted a
U.S. Phase 2 clinical study demonstrating that administration of an inhaled formulation of AAT through inhalation results in greater dispersion
of AAT to the target lung tissue, including the lower lobes and lung periphery. Accordingly, the inhaled formulation of AAT requires a
significantly lower
therapeutic dose, estimated at approximately 1/8th of the IV dose, and we believe it would be more effective
in reducing inflammation of the lung tissue
and inhibiting the uncontrolled neutrophil elastase that causes the breakdown of the lung
tissue and the emphysema.
Because of the smaller amount
of AAT dose used in Inhaled AAT for AATD (since it is applied directly to the site of action rather than
administered systematically),
we believe that this product, if approved, will enable us to treat significantly more patients from the same amount of plasma
and production
capacity and may be more cost effective for patients and payors and may increase our profitability.
54
We conducted a double-blind
randomized placebo-controlled Phase 2/3 pivotal trial, under EMA guidance, which was completed at the end of
2013. A total of 168 patients
participated in the trial in seven countries in Europe and in Canada. Subjects in this trial were administered a twice daily
treatment
of Inhaled AAT or an equivalent dose of placebo for 50 consecutive weeks. The primary endpoint of the trial was the time from randomization
to
the first event-based exacerbation with severity of moderate or severe. Other endpoints, which were secondary and tertiary, included
additional
exacerbation measures, lung function, and quality of life. The trial was 80% powered based on the number of exacerbation events
collected in the study to
detect a difference between the two groups after 50 weeks. A 20% difference between the two groups was required
to prove efficacy and was considered
clinically meaningful, allowing the decision to prescribe the treatment. An open label extension
of an additional 50 weeks on active drug was offered to
study participants in most sites once they completed the initial 50-week period.
Treatment in the open label extension of the trial was completed in
November 2014.
This study did not meet its
primary and secondary endpoints. However, lung function parameters, including Forced Expiratory Volume in One
Second (“FEV1”)
% of Slow Vital Capacity (“SVC”) and FEV1 % predicted, FEV1 (liters) which was collected to support safety endpoints, showed
concordance of a potential treatment effect in the reduction of the inflammatory injury to the lung that is known to be associated with
a reduced loss of
respiratory function.
In accordance with guidance
received following the meetings conducted with the European rapporteur and co-rapporteur, we performed several
post-hoc analyses. Results
of the post hoc analyses indicated that after one year of daily inhalation of our Inhaled AAT, clinically and statistically
significant
improvements were seen in spirometric measures of lung function, particularly in bronchial airflow measurements FEV1 (liters), FEV1%
predicted
and FEV1/SVC. These favorable results were even more evident when analyzing the overall treatment effect throughout the full year.
For lung function, overall
effect for one year:
●
FEV1 (L) rose significantly in AAT treated patients and decreased in placebo treated patients (+15ml for AAT vs. -27ml for placebo, a 42 ml
difference, p=0.0268)
●
There was a trend towards better FEV1% predicted (0.54% for AAT vs. -0.62% for placebo, a 1.16% difference, p=0.065)
●
FEV1/SVC% rose significantly in AAT treated patients and decreased in placebo treated patients (0.62% for AAT vs. -0.87% for placebo, a
1.49% difference, p=0.0074)
For lung function change at
week 50 vs. baseline:
●
There was a trend towards reduced FEV1 (L) decline (-12ml for AAT vs. -62ml for placebo, a 50 ml difference, p=0.0956)
●
There was a trend towards a reduced decline in FEV1% predicted (-0.1323% for AAT vs. -1.6205% for placebo, a 1.4882% difference,
p=0.1032)
●
FEV1/SVC% rose significantly in AAT treated patients and decreased in placebo treated patients (0.61% for AAT vs. -1.07% for placebo, a
1.68% difference, p=0.013)
During March 2014, we initiated
a Phase 2 trial in the United States. The trial was completed in May 2016. This trial was intended to serve as a
supplementary trial to
the European Phase 2/3 trial and was designed to incorporate parameters required by the FDA. This Phase 2, double-blind, placebo-
controlled
study explored the Endothelial Lining Fluid (“ELF”) and plasma concentration as well as safety of Inhaled AAT in AATD subjects.
The subjects
received one of two doses of Inhaled AAT or placebo. The study involved the daily inhalation of 80 mg or 160 mg of human
AAT or placebo via the eFlow
device for 12 weeks. Following the 12-week double blind period, the subjects were offered to participate
in an additional 12 weeks open label period during
which they receive only Inhaled AAT therapy. In December 2015, we completed the enrollment
of patients in the study and in August 2016 we reported
positive top-line results, according to which we met the primary endpoint.
AATD patients treated with
our Inhaled AAT product in that U.S. Phase 2 clinical trial, demonstrated a significant increase in ELF AAT antigenic
level compared to
the placebo group (median increase 4551 nM, p-value<0.0005 (80 mg/day, n=12), and 13454 nM, p-value<0.002 (160mg/day, n=12)).
These
results are more than twice the increase of ELF antigenic AAT level (+2600 nM) observed in our previously completed intravenous AAT pivotal
study (60mg/kg/week). Antigenic AAT represents the total amount of AAT in the lung, both active and inactive. The study results also showed
that our
Inhaled AAT is more efficient than IV to restore ELF AAT level within the lung. In addition, ELF Anti-Neutrophil Elastase inhibitory
(“ANEC”) level also
increased significantly [median increase 2766 nM, p-value<0.0005 (80mg/day) and 3557 nM, p-value<0.004
(160 mg/day)]. The increase in ELF ANEC
level was also more than twice that demonstrated in our previously completed IV AAT pivotal study.
The ANEC level represents the active AAT that can
counterbalance further damage by neutrophil elastase.
55
The updated data included
in our poster presentation of May 2017 demonstrated that ELF-AAT, neutrophil elastase (NE)-AAT and ANEC
complexes concentration significantly
increased in subjects receiving the 80 mg and 160 mg doses, (median increase of 38.7 neutrophil migration (nM), p-
value<0.0005 (80
mg/day, n=12), and median increase of 46.2 nM, p-value<0.002 (160 mg/day, n=10)). This is a specific measure of the anti-proteolytic
effect in the ELF and represents the amount of NE that was broken down by AAT. The increase in levels of functional AAT was six times
higher (160 mg
per day) than is achievable with IV AAT. In addition, ELF NE decreased significantly. Also, the 80 mg data demonstrated
a significant reduction in the
percentage of neutrophils. Finally, aerosolized M-specific AAT was detected in the plasma of all subjects
receiving Inhaled AAT, consistent with what was
seen in the Phase 2/3 clinical trial of our Inhaled AAT conducted in Europe.
We filed the MAA for our Inhaled
AAT for AATD during the first quarter of 2016 and in June 2017 we withdrew the MAA, as following extensive
discussions with the EMA we
concluded that the EMA did not view the data submitted as sufficient, in terms of safety and efficacy, for approval of the
MAA, and that
the supplementary data needed for approval required an additional clinical trial. While the post-hoc data indicated a statistically significant
and clinically meaningful improvement in lung function, the EMA was of the opinion that an overall positive conclusion on the effect of
Inhaled AAT for
AATD could not be reached based on that post-hoc analysis, and that the treatment of AATD patients with our Inhaled AAT
product should be further
evaluated in the clinic in order to obtain comprehensive long-term efficacy and safety data. The EMA was of
the opinion that the study failed to show
sufficient beneficial effects in the population studied. In addition, there were concerns about
the tolerability and safety profile of the AAT, mainly in
patients with severe lung disease. Lastly, the EMA raised concerns about the
high rate of patients with ADA responding to AAT, which might reduce its
effects or make patients more prone to allergic reactions, despite
evidence that none of the patients with such ADA response had allergic reaction nor a
lower level of AAT in the serum. When presented
with the European Phase 2/3 study data, the FDA expressed concerns and questions in connection with
the safety and efficacy of Inhaled
AAT for the treatment of AATD and the risk/benefit balance to patients based on that data and product characteristics.
Following several discussions
with the FDA and EMA, through which additional data and information were provided and we addressed both
agencies’ guidance with
respect to our proposed subsequent Phase 3 pivotal study protocol, we received positive scientific advice from the CHMP of the
EMA related
to the development plan for our proposed pivotal Phase 3 pivotal study for Inhaled AAT for AATD, and in April 2019, we received a letter
from the FDA stating that we had satisfactorily addressed their concerns and questions with respect to the proposed Phase 3 clinical trial.
During December 2019, we initiated
our Phase 3 InnovAATe trial, under an FDA IND and a European CTA (Clinical Trial Application) and
announced the first patient-in. InnovAATe
is a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial designed to assess the efficacy and safety
of Inhaled AAT in
patients with AATD and moderate lung disease. The original study protocol included up to 220 patients will be randomized 1:1 to
receive
either Inhaled AAT at a dose of 80mg once daily, or placebo, over two years of treatment. The primary endpoint of the InnovAATe trial
is lung
function measured by FEV1. Secondary endpoints include lung density changes as measured by CT densitometry, as well as other parameters
of disease
severity, such as additional pulmonary functions, exacerbation rate and six-minute walk test. The safety profile is being monitored
continuously by an
independent Data and Safety Monitoring Board (DSMB). The study was led by Jan Stolk, M.D., Department of Pulmonology,
Member of European
Reference Network LUNG, Leiden University Medical Center, the Netherlands, until his retirement in September 2024.
The study investigators include
some of the most recognized KOLs in the AATD field, such as Prof. Noel Gerry McElvaney, M.D - Head of
the Department of Medicine and Respiratory
Research Division at Beaumont Hospital, Dublin, Royal College of Surgeons in Ireland (RCSI)
and Prof. Alice Turner, M.D - Professor of Respiratory
Medicine, Queen Elizabeth Hospital Birmingham, Director of Research Knowledge and
Transfer, University of Birmingham.
Prior to the initiation of
the pivotal Phase 3 InnovAATe clinical trial, we completed a Human Factor Study (“HFS”) to support the combination
product,
consisting of our investigational Inhaled AAT and the eFlow nebulizer system of PARI Pharma GmbH. Following feedback from the FDA, we
conducted a subsequent HFS to support and improve the product’s use regimen, which was subsequently incorporated into the InnovAATe
study.
Through the beginning of 2022,
enrollment in the pivotal Phase 3 InnovAATe clinical trial was negatively affected by the impact of COVID-19
pandemic on healthcare systems.
During the second half of 2022 and 2023, following the moderation of the pandemic and gradual recovery of health
systems in Europe, the
study was expanded across additional sites in Europe and enrollment accelerated. Additional clinical sites were opened in 2024 in
the
United Kingdom. As of January 31, 2025, 87 patients were enrolled in the study, 38 of whom had completed the two-year study treatment
period.
Through January 31, 2025, only six patients discontinued treatment prematurely, only two due to safety events related to the exposure
to the study drug,
and only one drug-related serious adverse event was reported. Additionally, as part of routine and planned monitoring
processes, and for the eighth time
since study initiation, the independent DSMB recommended that the trial continue without modification.
Moreover, based on a safety assessment
performed for the first 42 patients (which included treatment duration per patient ranging between
6 and 24 months), the DSMB advised that a safety
assessment for 60 patients (completing six months of treatment), originally requested
by the FDA, be waived and that due to the favorable safety of the
study to date, there is no need for further dedicated safety assessment
beyond the standard DSMB bi-annual meetings.
During the second quarter
of 2023, we received scientific advice from the EMA CHMP regarding the ongoing pivotal InnovAATe trial for Inhaled
AAT that reconfirms
the overall design of the study and acknowledges the statistically and clinically meaningful improvement in lung function (FEV1)
demonstrated
in our previously completed Phase 2/3 European study, which served as the basis for the design and the selection of the primary endpoint
of
our current Phase 3 study.
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In January 2024, we conducted
a meeting with the FDA regarding the progress of the ongoing InnovAATe study, during which the FDA
reconfirmed the overall design of the
study and endorsed the DSMB unblinded positive safety assessment of 42 patients, accepting the DSMB’s
recommendation to waive the
need for an additional safety assessment point of 60 patients with at least six months of treatment. During the meeting, the
FDA also
accepted our plan to conduct an open label extension study, which was initiated mid-2024 and expressed willingness to potentially accept
a P<0.1
alpha level in evaluating InnovAATe for meeting the efficacy primary endpoint for registration, which may allow for the acceleration
of the program.
Following our January 2024
meeting with the FDA, during the first quarter of 2024, we filed an IND amendment with the FDA, which included a
proposed revised SAP
and study protocol, which, upon its acceptance, enables a reduction in the study sample size. We subsequently received the FDA’s
initial feedback, and, in January 2025, after further discussions with the FDA, we announced that the FDA agreed to our proposal to change
the two-sided
Type 1 error rate control from 5% to 10% (P<0.1 alpha level) for our pivotal InnovAATe trial. Based on the accepted change
in the p-value, as well as
additional expected revisions to the trial’s SAP, we plan to reduce the study sample size from 220 patients
to approximately 180 patients, while maintaining
the trial’s statistical power, and to conduct an interim futility analysis by the
end of 2025. We intend to submit the revised SAP and study protocol,
incorporating the planned revisions, as an IND amendment during the
second half of 2025 and expect to receive additional feedback from the FDA within a
few months of submission. During 2024, we conducted
a follow-up scientific advice session with the EMA CHMP regarding the proposed revised SAP,
and further clarification with the CHMP is
required. We plan to approach the CHMP again after obtaining agreement from the FDA on the IND
amendment.
Based on our plan to reduce
the study sample size and our current estimated recruitment rate, we forecast completing recruitment (Last Patient In)
by the end of 2026
and completing the two years of treatment for the last enrolled patient (Last Patient Out) by the end of 2028. Recruiting patients for
a
placebo-controlled study for an orphan indication, such as AATD, is challenging, and we are continuing to manage it through various
actions. Moreover,
our ability to enroll patients at the expected rate, who meet the study inclusion criteria, is subject to various external
factors which may be beyond our
control. For example, from 2020 through 2022, enrollment was materially negatively affected by the COVID
pandemic. See Item 3D. Risk Factors – Risks
Related to Development, Regulatory Approval and Commercialization of Product Candidates.
In addition to the pivotal
study and based on feedback received from the FDA regarding ADAs to Inhaled AAT, we intend to also conduct a sub-
study in North America
in which approximately 30 patients will be evaluated for the effect of ADA on AAT levels in plasma with Inhaled AAT and IV
AAT treatments.
The study principal design and protocol were acceptable to the FDA; however, the final protocol needs to be finalized, and the study
initiation
is planned for 2026.
We continue to evaluate partnering
opportunities for the future commercialization of the Inhaled AAT product in the U.S. and Europe.
Recombinant AAT
During 2020 we initiated the
development of a recombinant human Alpha 1 Antitrypsin (“rhAAT”) product, focusing on therapeutic indications
which would
potentially leverage the immune-modulatory mechanism of action of the protein. As part of this project, we developed analytical tools
that
support the selection of the appropriate cell lines and characterization of the product. We engaged Cellca, a CDMO located in Germany,
part of Sartorius
Stedim BioTech Group, to pursue the cell line development of the rhAAT in Chinese hamster ovary cells with the goal
of developing a product of high
productivity and robust quality. During the period of 2022 to 2024, we tested the clones previously selected
using in-vitro and two ischemic reperfusion
injury (“IRI”) in-vivo models. The results of these studies indicated significant
tissue-protective effect of the rhAAT, as well as enhanced animal survival.
We are currently looking to
attract a strategic partner to collaborate in the further development of this product, and we do not plan to continue its
development
independently due to other development priorities.
Other early-stage development programs
During 2024, we continued
to advance three early-stage development programs of plasma derived product candidates. These programs include: (i)
a human plasma-based
eye drops for potential treatment of several ocular conditions. The product is currently under chemistry, manufacturing and controls
(“CMC”)
development and pre-clinical evaluation; (ii) an automated portable small-scale system for extraction and purification of hyper-immune
IgG from
convalescent plasma, at the hospital/blood bank setting, for immediate response to a variety of unmet medical needs, including
pandemic outbreaks, as well
as possible treatment of currently neglected or untreated viral diseases. The initial design of the system
was completed, and we are currently in the process
of seeking regulatory guidance for the advancement of this product development; and
(iii) a hyper-immune anti-tuberculosis IgG as a potential
complementary treatment to existing standard of care. The program is developed
in collaboration with the Clinical Microbiology and Immunology
department of the Medicine-Sackler Faculty of Tel Aviv University and is
partially funded by the Israel Innovation Authority. In 2023 and 2024, the anti-
tuberculosis IgG was developed and produced on a small
scale for research and development purposes and assessed in-vitro, and we plan to test the product
in-vivo during 2025.
We plan to advance these programs
until completion of proof-of-concept, at which point we plan to evaluate continued internal development,
partnering or out-licensing.
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Investigators initiated studies
We are actively supporting
investigator-initiated studies (“IIS”) related to our commercial products. These studies are clinical trials that are
conceived,
developed, and conducted by independent researchers or institutions, rather than by pharmaceutical companies. Unlike regular industry-
sponsored
studies, in IIS, the investigator acts as both the sponsor and the principal investigator, taking full responsibility for the study’s
design,
implementation, and management. These studies offer both clinical and commercial value. Clinically, IIS generate real-world data
on drug effectiveness
and safety, addressing questions that arise in day-to-day medical practice. Commercially, they provide us with a
cost-effective source of clinical data while
maintaining a hands-off approach. IIS can explore new therapeutic indications for existing
drugs, compare different treatment options, or evaluate cost-
effectiveness, often focusing on areas that may not be commercially viable
for pharmaceutical companies to pursue directly. By supporting IIS, we can gain
valuable insights into our product’s performance across
diverse clinical settings without incurring the full responsibilities and costs associated with
sponsoring the research.
Strategic Partnerships
We currently have strategic
partnerships with several different companies to support the distribution and/or development of our products portfolio.
Certain strategic
partnerships relating to our Proprietary Products segment are discussed below.
Kedrion (KEDRAB and Other Products Distributed
in Israel)
On July 18, 2011, we entered
into a supply and distribution agreement with Kedrion, a biopharmaceutical company that collects and fractionates
blood plasma to produce
and distribute worldwide plasma-derived therapies for use in treating and preventing rare and debilitating conditions, such as
coagulation
and neurological disorders and primary and secondary immunodeficiencies. The agreement provided for exclusive cooperation for the
completion
of clinical development, marketing and distribution of our anti-rabies immunoglobulin, KAMRAB, in the United States under the brand name
KEDRAB. According to the agreement, Kedrion bore all the costs of the Phase 2/3 clinical trials for our product in the United States.
In addition, costs
related to any Phase 4 clinical trials and the FDA Prescription Drug User fee required for all new approved drugs were
shared equally between us and
Kedrion. In October 2016, we entered into an addendum to the agreement to conduct a safety clinical trial
for the treatment of pediatric patients in the
United States, pursuant to which we and Kedrion agreed to equally share the cost of such
trial. The agreement was further supplemented in October 2018
and June 2019, regarding the determination of purchase price and payment
terms under the agreement.
The agreement grants Kedrion
exclusive rights to market and sell KEDRAB in the United States. We retain intellectual property rights to
KEDRAB. Kedrion is obligated
to purchase a minimum amount of KEDRAB units per year during the term of the agreement.
In April 2018, following the
receipt of the FDA marketing authorization, KEDRAB was launched in the United States. For more information
about the product, see above
“Item 4B. Information on the Company —Business Overview — Proprietary Products Segment — Our Commercial
Product
Portfolio — Proprietary Products — KAMRAB/KEDRAB”.
The original agreement had
a term of six years, commencing on the date by which KEDRAB U.S. launch was feasible (i.e., until March 2024),
and Kedrion had an option
to extend the term by two additional years, until March 2026, which it exercised in July 2023.
In December 2023, we entered into a binding memorandum of understanding
with Kedrion for the amendment and extension of the distribution
agreement between the parties, which represents the largest commercial
agreement secured by us to date. Subsequently, in January 2025, we entered into an
amendment to the distribution agreement, which supersedes
and memorializes the agreements and undertakings set forth in the binding memorandum of
understanding, along with additional terms and
conditions. Under these agreements, the distribution agreement was extended until December 31, 2031, and
Kedrion has the right to extend
the agreement for an additional two years, until December 31, 2033, by providing written notice no later than December 31,
2030. Under
the terms of the amended distribution agreement, Kedrion committed to purchasing minimum quantities of KEDRAB during the first four
years
(i.e., 2024 through 2027) of the eight-year term that began in January 2024, generating projected minimum aggregate revenues for us of
approximately $180.0 million over such four-year period, of which a minimum of approximately $135.0 million is to be acquired during the
remaining
three years of such four-year period (i.e., 2025 through 2027). In addition, the parties agreed on a mechanism to be used in
determining the minimum
commitments for 2028 through the term of the agreement. KEDRAB’s in-market sales in the United States grew
significantly in 2024 and 2023, reflecting
the increased demand for KEDRAB in the U.S. market. In addition, the parties agreed to explore
the potential expansion of KEDRAB distribution by
Kedrion to other territories beyond the United States.
In addition to customary termination
provisions (including the right of either party to terminate the agreement if the other party fails to perform or
violates any provision
of the agreement in any material respect and the failure continues unremedied for a defined period), Kedrion has the right to
terminate
the agreement, upon prior written notice, (i) for any reason after receipt of FDA approval, (ii) in the event that the FDA BLA is suspended
or
revoked and cannot be reinstated within a certain period of time, or (iii) a major regulatory change occurs that materially and adversely
increases the
clinical trial costs. We have the right to terminate the agreement in the event that (i) a major regulatory change occurs
that materially and adversely
increases the manufacturing costs of KEDRAB, (ii) a major regulatory change occurs that poses considerable
difficulties on submission of an application
for FDA approval, or (iii) clinical trials are not initiated within a certain time after
either receipt by Kedrion of enough product or FDA approval to begin
clinical trials. Upon termination or expiration of the agreement,
Kedrion’s exclusive rights to market and sell KEDRAB in the U.S. market will be
canceled, at which point we may elect to market
and sell the product in the U.S. market on our own or otherwise engage a different distributor.
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For information related to
a plasma purchase agreement with Kedplasma, a subsidiary of Kedrion, for the supply of anti-rabies hyper-immune
plasma required for the
manufacturing of KAMRAB/KEDRAB see “Raw Materials” section below.
Takeda (GLASSIA)
We have a strategic arrangement
with Takeda that includes three main agreements: (1) an exclusive manufacturing, supply and distribution
agreement, pursuant to which
through 2021, we manufactured GLASSIA for sale to Takeda for further distribution in the United States, Canada, Australia
and New Zealand
(through the end of 2023, GLASSIA was distributed by Takeda only in the United States and, commencing in 2024, also in Canada); (2)
a
technology license agreement, which grants Takeda licenses to use our knowledge and patents to produce, develop and sell GLASSIA; and
(3) a fraction
IV-I paste supply agreement, pursuant to which Takeda supplies us with fraction IV plasma, a plasma derivative, produced
by Takeda, as discussed under
“— Manufacturing and Supply — Raw Materials — Plasma derived Fraction IV paste
for GLASSIA manufacturing.” Other than with respect to plasma-
derived AAT administrated by IV, we retain all rights, including
distribution rights of GLASSIA, in all territories, other than the ones mentioned above, as
well as distribution rights to any other form
of AAT administration, including Inhaled AAT.
The agreements were originally
executed with Baxter Healthcare Corporation (“Baxter”) in August 2010. During 2015, Baxter assigned all its
rights under the
agreements to Baxalta US Inc. (“Baxalta”), an independent public company which spun-off from Baxter. In 2016, Shire plc. (“Shire”)
completed the acquisition of Baxalta, and as a result, all of Baxalta’s rights under the agreements were assigned to Shire. In January
2019, Takeda
completed its acquisition of Shire, and all rights under the agreements transferred to Takeda.
Exclusive Manufacturing, Supply and Distribution
Agreement
Pursuant to the exclusive
manufacturing, supply and distribution agreement, as amended from time to time, Takeda was obligated to purchase a
minimum amount of GLASSIA
per year until the end of 2021. Under the agreement, Takeda is also obligated to fund required Phase 4 clinical trials related
to GLASSIA
up to a specified amount, and if the costs of such clinical trials are in excess of this amount, we agreed to fund a portion of the additional
costs. We also undertook to reimburse Takeda for its GLASSIA marketing efforts up to a limited amount during the years 2017-2020.
In November 2021, pursuant
to the technology license agreement described below, Takeda completed the technology transfer of GLASSIA
manufacturing and initiated its
own production of GLASSIA for the U.S. market. Accordingly, we completed the supply of GLASSIA to Takeda, and
through the end of 2023,
we remained an approved supplier of the product. We do not anticipate continuing to manufacture and supply GLASSIA to
Takeda under the
exclusive manufacturing, supply and distribution agreement.
Technology License Agreement
The technology license agreement
provides an exclusive license to Takeda, with the right to sub-license to certain manufacturing parties, of our
intellectual property
and know-how regarding the manufacture and additional development of GLASSIA for use in Takeda’s production and sale of
GLASSIA
in the United States, Canada, Australia and New Zealand.
Pursuant to the technology
license agreement, following the initiation of sales of GLASSIA manufactured by Takeda, Takeda is required to pay us
royalties at a rate
of 12% on net sales through August 2025, and at a rate of 6% thereafter until 2040, with a minimum of $5 million annually, for each of
the years from 2022 to 2040. During the first quarter of 2022, Takeda began to pay us royalties on sales of GLASSIA manufactured by it
in the United
States. During 2021 Takeda received an approval from Health Canada for the marketing and distribution of GLASSIA in Canada,
and it commenced sales
of GLASSIA in Canada in 2024. For the years ended December 31, 2024, and 2023, and the period between March and
December 2022, we accounted for
$16.9 million, $16.1 million and $12.2 million, respectively, of sales-based royalty income from Takeda.
Pursuant to an amendment to
the license agreement entered into in March 2021, upon completion of the transition of GLASSIA manufacturing to
Takeda, which was completed
in November 2021, we transferred to Takeda the GLASSIA U.S. BLA, in consideration of an additional $2.0 million
payment, which was paid
to us in March 2022, following the FDA’s acknowledgment of the BLA transfer.
Pursuant to the technology
license agreement, the intellectual property rights for any improvements on the manufacturing process or formulations
belong to the party
that develops the improvements, with each party agreeing to cross-license the developed improvements to the other party. We retain an
option to license any intellectual property developed by Takeda under the agreement that is not considered an improvement on the licensed
technology.
Additionally, Takeda owns any intellectual property it develops using the licensed technology for new indications for the
intravenous AAT product, for
which we retain an option to license at rates to be negotiated. Any technology related to new indications
for the intravenous AAT product developed by us
during the royalty payments period will be part of the licensed technology covered by
the technology license agreement.
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The technology license agreement
expires in 2040. Either party may terminate the agreement, in whole or solely with respect to one or more
countries covered by the distribution
agreement, pursuant to customary termination provisions. Takeda also has the right to terminate the agreement, upon
prior written notice,
in the event that: (i) our manufacturing process technology for GLASSIA is determined to materially infringe upon a third party’s
intellectual property rights, and we have not obtained a license to such third party’s intellectual property or provided an alternative
non-infringing
manufacturing process; (ii) there are certain decreases in GLASSIA sales in the United States unless such decreases are
due to transfers to Inhaled AAT for
AATD; or (iii) the regulatory approval process in the United States has been withdrawn or rejected
as a result of our inaction or lack of diligent effort,
provided such withdrawal or rejection was not primarily caused by the breach by
Takeda of its obligations. We have the right to terminate the agreement,
upon prior written notice: (i) if Takeda contests or infringes
upon our intellectual property; (ii) if regulatory approval in one or more countries covered by
the technology license agreement is withdrawn
or rejected and not reversed, provided it was not primarily caused by the breach by us of our obligations; or
(iii) in the event that
GLASSIA produced by Takeda, other than as a result of our manufacturing process technology, is determined to materially infringe
upon
a third party’s intellectual property rights, provided that the termination right is limited only to the country in which such judgment
is binding.
Following any termination, other than expiration of the agreement, all licensed rights will revert to us.
Upon expiration of the agreement,
Takeda will be entitled to a non-exclusive, perpetual, royalty free license.
Pursuant to the exclusive
manufacturing, supply and distribution agreement and the technology license agreement, we were entitled to receive an
upfront payment
and certain payments for the achievement of certain development-based milestones related to the transfer of technology to Takeda and
sales-based
milestones. To date, we have received the total aggregate milestone payments under the agreement ($45 million).
PARI
On November 16, 2006, we entered
into a license agreement with PARI (the “Original PARI Agreement”) regarding the clinical development of
an inhaled formulation
of AAT, including Inhaled AAT for AATD, using PARI’s “eFlow” nebulizer. Under the Original PARI Agreement, we received
an
exclusive worldwide license, subject to certain preexisting rights, including the right to grant sub-licenses, to use the “eFlow”
nebulizer, including the
associated technology and intellectual property, for the clinical development, registration, and commercialization
of inhaled formulations of AAT to treat
AATD and respiratory deterioration, and to commercialize the device for use with such inhaled
formulations. The agreement also provided for PARI’s
cooperation with us during the pre-clinical phase and other clinical phases
of development of Inhaled AAT, where each of the parties was responsible for
developing and adapting its own product and bore the costs
involved.
Pursuant to the Original PARI
Agreement, we agreed to pay PARI royalties from future sales of Inhaled AAT, after certain deductions, at the rates
specified in the agreement.
We have agreed to pay PARI tiered royalties ranging from the low single digits up to the high single digits based on the annual
net sales
of inhaled formulations of AAT for the applicable indications. The royalties will be paid for each country separately, until the later
of (i) the
expiration of the last of certain specified patents covering the “eFlow” nebulizer, or (ii) 15 years following
the first commercial sale of an inhaled
formulation of AAT in that country (the “PARI Royalty Period”). During the PARI Royalty
Period, PARI is obligated to pay us specified percentages of its
annual sales of the “eFlow” nebulizer for use with Inhaled
AAT above a certain threshold defined in the agreement and after certain deductions.
On February 21, 2008, we entered
into an addendum to the Original PARI Agreement (together with the Original PARI Agreement, the “PARI
Agreement”), which extended
the exclusive global license granted to us to use the “eFlow” nebulizer, including the associated technology and intellectual
property, for the clinical development, registration and commercialization of Inhaled AAT for two additional indications of lung disease,
namely cystic
fibrosis and bronchiectasis. Pursuant to the addendum, each party will be responsible for developing and adapting its own
product for the additional
indications and will bear the costs involved. Additionally, we and PARI will supply, each at its own expense,
Inhaled AAT and the “eFlow” nebulizers,
respectively, and in the quantities required for all phases of clinical studies worldwide
for the additional indications. In addition, PARI will provide us, at its
expense, with technical and regulatory support regarding the
“eFlow” nebulizer. Sales of the inhaled formulation of AAT for the additional indications will
entitle PARI to royalty payments
as provided in the Original PARI Agreement. We are currently not progressing the development of Inhaled AAT for the
additional indications.
The PARI Agreement expires
when the PARI Royalties Period ends. Either party can terminate the PARI Agreement upon customary termination
provisions. Additionally,
upon the occurrence of any one of the following events, PARI has the right to negotiate with us in good faith about whether to
continue
our collaboration: (i) PARI’s costs of the required clinical trials exceed a certain amount, unless we or a third party incurs such
expenses on behalf
of PARI; (ii) an inhaled formulation of AAT is not successfully registered with any regulatory authorities by 2016;
(iii) there are no commercial sales of
inhaled formulations of AAT within a certain period after successful registration with any regulatory
authority; or (iv) we cease development of inhaled
formulations of AAT for a certain period of time. If, within 180 days of PARI’s
request to negotiate, we do not agree to continue the collaboration, PARI
has the option either to render the license they grant to us
non-exclusive or to terminate the agreement. We have the right to terminate the agreement, upon
prior written notice, (i) in the event
that the “eFlow” nebulizer is determined to infringe upon a third party’s intellectual property rights, (ii) an injunction
barring the use of the “eFlow” nebulizer has been in place for a certain period of time, (iii) a clinical trial for inhaled
formulations of AAT fails as a result
of, after a cure period, the “eFlow” nebulizer not conforming to specifications or PARI’s
inability to supply the “eFlow” nebulizer; or (iv) failure by PARI
to register the “eFlow” nebulizer within a
certain period of time after receiving Phase 3 results for Inhaled AAT for AATD. Following any termination, all
licensed rights will revert
to PARI, unless we terminate the agreement as a result of PARI’s bankruptcy, payment failure or material breach, in which case
we
retain the license rights to the “eFlow” nebulizer as long as we continue making royalty payments.
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On February 21, 2008, we also
signed a commercialization and supply agreement with PARI that provides for the commercial supply of the
“eFlow” nebulizer
and its spare parts to patients who may be treated with the inhaled formulation of AAT, if approved, either through its own distributors,
our distributors or independent distributors in countries where PARI does not have a distributor. The commercialization and supply agreement
expires upon
the earlier of (1) the end of four years from (x) the end of the last PARI Royalties Period, or (y) the termination of the
PARI Agreement by one party due to
the other party declaring bankruptcy, failing to make a payment after a 30-day cure period or breach
of a material provision after a 30-day cure period, or
(2) the termination of the PARI Agreement pursuant to its terms, other than for
reasons as previously described, in which case the commercialization and
supply agreement terminates simultaneously with the PARI Agreement
provided that PARI ensures availability of the “eFlow” nebulizer and its associated
spare parts and service to anyone being
treated with the inhaled formulation of AAT at the time of such termination, for the warranty period of the device or
for a longer period,
if required by the applicable law or the relevant regulatory authority.
In May 2019, we signed a Clinical
Study Supply Agreement (“CSSA”) with PARI for the supply of the required quantities of PARI’s “eTrack”
controller
kits and the “PARItrack” web portal associated with PARI’s “eFlow” nebulizer required for our pivotal Phase
3 InnovAATe clinical trial and for
the FDA required HFS. The CSSA is a supplement agreement to the PARI Agreement and will expire upon
the expiration or termination of the PARI
Agreement.
Manufacturing and Supply
We have a production plant
located in Beit Kama, Israel. We currently manufacture six of our proprietary plasma-derived commercial products,
including three FDA
approved products, in this facility: KEDRAB/KAMRAB, CYTOGAM, GLASSIA, KAMRHO (D), and two types of snake bite
antiserum product. We also
manufacture at our plant the investigational Inhaled AAT product.
In December 2022, we submitted
an application to the FDA, and in May 2023, we received FDA’s approval to manufacture CYTOGAM at our
facility in Beit Kama, Israel.
Following FDA’s approval, CYTOGAM manufactured at our Israeli facility has been available for commercial sale in the
United States
since October 2023. The FDA approval represented the successful conclusion of the technology transfer process of CYTOGAM from the
previous
manufacturer, CSL Behring. In July 2023, we also received the approval of Health Canada to manufacture CYTOGAM at our facility, following
a
technology transfer application that we submitted in January 2023. As part of the CYTOGAM technology transfer process, we engaged Prothya
as a third-
party contract manufacturer to perform certain manufacturing activities required for the manufacturing of CYTOGAM.
We operate our Beit Kama production
facility on a campaign basis so that at any time the facility is assigned to produce only one product. The
utilization of the facility’s
production capacity among the various products is determined based on orders received, sales forecasts and development needs.
During each
year we conduct routine maintenance shutdowns of our plant, which may last up to a few weeks. In addition, we periodically invest in
upgrading
infrastructure and adjusting capacity needs.
Our production plant has consistently
successfully passed inspections by various health authorities with no critical observations, including by the
FDA, IMOH, Health Canada
and the health agencies of Croatia, Kazakhstan and Russia. Most recently,
our production plant passed inspections with no
critical observations by the FDA (in March 2023), Health Canada (in May 2023),
the Ministry of Health of the Russian Federation (in November 2024) and
IMOH (in December 2024).
Most changes in our production
processes related to our Proprietary Products segment must be approved by the FDA and/or similar authorities in
other jurisdictions. From
time to time, we make certain required modifications to our manufacturing process and are required to make certain filings to
report such
changes to the FDA and/or other similar authorities.
WINRHO SDF, HEPAGAM B and
VARIZIG, which we acquired in November 2021, are currently manufactured by Emergent under a
manufacturing services agreement we assumed
as part of the acquisition of the portfolio from Saol. Under the agreement, Emergent serves as our exclusive
manufacturer of the three
products. The manufacturing services are performed at Emergent’s facilities in Winnipeg, Canada. The current agreement is in
effect
until September 27, 2027, and may be terminated without cause by us upon at least two years advance notice or immediately in the event
of a
manufacturing failure (as defined in the agreement). Emergent may terminate the agreement upon at least three years advance notice.
We expect to continue
manufacturing these products by Emergent in the foreseeable future and are planning to initiate a technology transfer
to transition the manufacturing of
these products to our facility in Beit Kama, Israel. Such a technology transfer would be subject to
execution of a new, amended manufacturing services
agreement with Emergent covering operational aspects and technology transfer related
services. We anticipate that, once initiated, such technology transfer
could be completed within four to five years.
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Raw Materials
The main raw materials in
our Proprietary Products segment are hyper-immune plasma and fraction IV derived from normal source plasma. We
also use other raw materials,
including both natural and synthetic materials. We purchase raw materials from suppliers who are regulated by the FDA, EMA
and other regulatory
authorities. Our suppliers are approved in their countries of origin and by the IMOH. The raw materials must comply with strict
regulatory
requirements. We require our raw materials suppliers to comply with the cGMP regulations, and we audit our suppliers from time to time.
We
are dependent on the regular supply and availability of raw materials in our Proprietary Products segment.
We maintain relationships
with several suppliers to ensure availability and reduce reliance on specific suppliers. We are dependent, however, on
several suppliers
who supply specialty ancillary products prepared for the production process, such as specific gels and filters. See “Item 3. Key
Information — D. Risk Factors — We could become supply-constrained, and our financial performance could suffer, if we were
unable to obtain adequate
quantities of source plasma, plasma derivatives or specialty ancillary products that meet the regulatory requirements
of the FDA, the EMA, Health Canada
or the regulatory authorities in Israel, or if our suppliers were to fail to modify their operations
to meet regulatory requirements or if prices of source
plasma or plasma derivatives were to rise significantly.”
In the years ended
December 31, 2024, 2023 and 2022, we incurred $30.7 million, $43.1 million and $31.0 million of expenses, respectively, for
the
purchase of raw materials for the manufacturing of our Proprietary Products. The changes in the costs associated with
the purchase of raw materials are
driven by our inventory management and manufacturing plan.
Hyper-immune Plasma
Hyper-immune plasma is used
for the manufacturing of KEDRAB/KAMRAB, CYTOGAM, WINRHO SDF, VARIZIG, HEPAGAM B and
KAMRHO (D). We have several suppliers in the United
States for hyper-immune plasma with whom we have long-term supply agreements. Under such
long-term supply agreements, we work to secure
availability of hyper-immune plasma on an annual basis by providing forecasts to our suppliers based on
our customers’ actual and
forecasted demand.
In January 2012, we entered
into a plasma purchase agreement with Kedplasma, a subsidiary of Kedrion, for the supply of the anti-rabies hyper-
immune plasma required
for the manufacturing of KAMRAB (including for manufacturing of KEDRAB for sale to Kedrion for further distribution in the
U.S. market).
The agreement includes a commitment to supply certain minimum annual quantities at predetermined prices. The agreement is renewed every
three years, and the parties agree on quantity and pricing terms for each renewal period. We have an additional U.S.-based supplier of
anti-rabies hyper-
immune plasma.
CMV hyper-immune plasma for
the manufacturing of CYTOGAM is supplied to us by CSL Behring, initially under a three-year supply agreement
that we assumed from Saol,
and in December 2023, we entered into a new plasma supply agreement directly with CSL Behring, which supersedes the
assumed supply agreement.
The new agreement provides for the continued supply of required plasma for the manufacturing of the product for each of the
years 2024-2026.
Emergent is currently responsible
for securing the hyper-immune plasma from different plasma suppliers for the manufacturing of WINRHO SDF,
HEPAGAM B and VARIZIG, pursuant
to our manufacturing services agreement with Emergent (see above— “Manufacturing and Supply”). In 2024, we
began to
supply to Emergent hyper-immune plasma collected through our internal plasma collection operations for the manufacturing of WINRHO SDF.
While we continue to pursue
new long-term supply agreements for hyper-immune plasma with additional plasma-collection companies, we aim to
reduce our dependencies
on third-party suppliers by increasing our own supply of hyper-immune plasma, specifically for the manufacturing of
KEDRAB/KAMRAB, WINRHO
SDF and KAMRHO (D), through our plasma collection operations at our centers in Beaumont, Houston and the soon-to-
be opened San-Antonio
center. For information related to our internal plasma collection capabilities, see above “Plasma Collection.”
Plasma derived Fraction IV paste for GLASSIA
manufacturing
On August 23, 2010, in conjunction
with the partnership arrangement with Baxter (now Takeda), we signed a fraction IV paste supply agreement
with Baxter (now Takeda) for
the supply of fraction IV for use in the production of GLASSIA to be sold in the United States. Under this agreement, Takeda
also supplies
us with fraction IV used for the production, sale and distribution of GLASSIA in jurisdictions other than those which are covered under
the
exclusive manufacturing, supply and distribution agreement with Takeda as well as for other AAT derived products. Takeda did not receive
payment for the
supply of fraction IV plasma used by us for the manufacture of GLASSIA sold to Takeda through 2021. If we require fraction
IV for other purposes, we are
entitled to purchase it from Takeda at a predetermined price. The supply agreement terminates on August
23, 2040, subject to an option for earlier
termination in the event of a material breach.
We have an additional fraction
IV plasma supplier, approved for production of GLASSIA marketed in non-U.S. countries, and we may, in the
future, seek to obtain regulatory
approval to use fraction IV from this supplier for the U.S. market as well.
62
Marketing and Distribution
We distribute our Proprietary
Products in more than 30 countries world-wide including the United States, Canada, Russia, Argentina, Israel, India,
Turkey, Australia,
Switzerland, Poland, Romania and several other countries in Europe, Latin America, Asia, and the MENA region. We are also a supplier
of
an international organization specialized in providing health services for the Americas. We distribute our products in these markets directly
or through
strategic partners (e.g., Kedrion in the U.S. market) or by local distributers. We typically receive orders for our products
and receive requests for
participation in tenders for the supply of our products from our existing distributors as well as from new potential
distributors.
We sell KEDRAB to Kedrion
for distribution in the U.S. market and sell KAMRAB and KAMRHO (D) to other distributors in non-U.S.
countries. We market GLASSIA mainly
in Argentina, Russia, Israel and more recently, in Switzerland (in some of these markets under a different brand
name) through local distributors.
We distribute CYTOGAM, WINRHO
SDF, HEPAGAM B and VARIZIG in the U.S. market directly to wholesalers and local distributors, through
our wholly owned U.S. subsidiary,
Kamada Inc. Commencing September 2022, we assumed all distribution responsibilities for these products in the U.S.
market and are utilizing
a U.S.-based third-party logistics provider for storage, logistics and distribution, which provides complete order to cash services.
We
are also responsible for marketing activities, price determination, provision of rebates and credits as well as mandatory pricing reporting
requirements
for these products in the U.S. market. We also market, sell and distribute these products in non-U.S. countries, primarily
Canada and the MENA regions,
through engagement of local distributors. We continue to leverage our existing strong international distribution
network to expand the sales of CYTOGAM,
WINRHO SDF, HEPAGAM B and VARIZIG to other regions in which we currently operate in and furthermore,
we intend to explore the expansion of
sales of our other Proprietary Products, primarily GLASSIA and KAMRAB, to international markets,
primarily in the MENA region.
In 2022, as part of the establishment
of our U.S. operations, we deployed an experienced team of U.S.-based sales and medical affairs
professionals. The U.S. sales team promotes
our portfolio of specialty plasma-derived IgG products to physicians and other healthcare practitioners through
direct engagement and
opportunities at medical conventions. The medical affairs team educates physicians by addressing their scientific and clinical
inquiries,
along with participating in major medical conferences. Our activities promoting these important therapies, primarily CYTOGAM and VARIZIG,
represent the first time in over a decade that these hyper-immune specialty products have been supported by field-based activity in the
United States. We
are encouraged by the consistently positive feedback received from key U.S. physicians who are seeking to publish new
clinical data related to our
products, while conducting educational symposiums that we believe will have a positive impact on the understanding
of these medicines, contributing to
continued growth in demand.
Our promotional activities,
including engagements with healthcare practitioners, are conducted in compliance with the FDA’s restrictions on
promotion of pharmaceuticals,
and the Anti-Kickback statutes.
In the Israeli market, we
sell and distribute GLASSIA, KAMRAB and KAMRHO (D) independently to local HMOs and medical centers, or
through a third-party logistic
partner that specializes in the supply of equipment and pharmaceuticals to healthcare providers, and in addition we sell our
two types
of anti-snake venom to the IMOH.
Outside the U.S. and Israeli
markets, we may sell our Proprietary Products through local tenders by governing bodies (such as CBS and Hema-
Quebec in Canada, as well
as to an international organization), or our distributors may sell our Proprietary Products through a tender process and/or to the
private
market. The tender process is conducted on a regular basis by the distributors, sometimes on an annual basis. For existing distributors,
our existing
relationship does not guarantee additional orders in these tenders. The decisive parameter is generally the price proposed
in the tender. The distributor
purchases products from us and sells them to its customers (either directly or by means of sub-distributors).
In most cases, we do not sign agreements with
the end users, and as such, we do not determine the price to the end user or its terms of
payment and are not exposed to credit risks of the end users. In most
cases, our agreements with the local distributors award the various
distributors exclusivity in the distribution of our products in the relevant country, if
permitted. The distribution agreements are usually
made for a specific initial period and are subsequently renewed for certain agreed periods, where the
parties have the right to cancel
or renew the agreements with prior notice of several months. In these markets, we do not actively participate in the
marketing to the
end users, except for supplying marketing assistance where the cost is negligible or in some cases, reimburse the local distributor for
an
agreed amount of its actual marketing expenses.
We are establishing our footprint
in the MENA region as a leader in the specialty plasma-derived field by exploring geographical expansion
opportunities and strengthening
our relationships with KOLs across the region. Furthermore, we capitalize on our strong regulatory affairs capabilities to
register our
products with the relevant authorities to ensure proper and fast market access.
Most of the sales of our Proprietary
Products segment outside of Israel are made against open credit and some in documentary credit or advance
payment. Most of our sales in
Israel are made against open credit or cash. The credit given to some of our customers abroad (except for sales in
documentary credit
or advanced payment) is mostly secured by means of a credit insurance policy and in certain cases with bank guarantees.
In the Distribution segment,
we market our products in Israel to HMOs, hospitals and medical specialists on our own and we distribute the
products independently or
through a -party logistic provider. We sell certain of our Distribution segment products through offers to participate in public
tenders
that occur on an annual basis or through direct orders. The public tender process involves HMOs and hospitals soliciting bids from several
potential
suppliers, including us, and selecting the winning bid based on several attributes, primarily price and availability. The annual
public tender process is also
used by our existing Distribution segment products customers to determine their suppliers. As a result,
our existing relationship with customers in our
Distribution segment does not guarantee additional orders from such customers year-over-year.
63
To secure supply of our products
in the Distribution segment, we enter into supply and distribution agreements with the product owners, pursuant
to which we undertake
to register the products with the IMOH, acquire certain quantity of products and act as the product distributor in the Israeli market.
We work closely with those suppliers to develop annual forecasts, but these forecasts usually do not obligate our suppliers to provide
us with their products.
Customers
For the year ended December
31, 2024, sales to our three largest customers, Kedrion, Takeda and McKesson, one of the largest U.S. based
wholesaler, accounted for
31%, 10% and 8%, respectively, of our total revenues. For the years ended December 31, 2023, and 2022, sales to our three
largest customers,
Takeda, Kedrion and Clalit Health Services, an Israeli based HMO, accounted for and 23%, 11% and 7%, and 13%, 11% and 9%,
respectively,
of our total revenues.
While Kedrion, Takeda and
McKesson are our major customers, in the Proprietary Products segment other key customers include several U.S.
based wholesalers, an international
organization, two Canadian customers and our distributors in Argentina, Russia, the MENA region and other territories.
These arrangements
are further described above under “— Marketing and Distribution.”
Our primary customers in the
Distribution segment in Israel are HMOs, including Clalit Health Services and Maccabi Healthcare Services, Israeli
hospitals and the IMOH.
Seasonality
We have experienced in the
past, and may experience in the future, certain fluctuations in our quarterly revenues.
Competition
The worldwide market for pharmaceuticals
in general, and biopharmaceutical and plasma derived products, in particular, has, in recent years,
undergone a process of consolidation
through mergers and acquisitions. This trend has led to a reduction in the number of competitors and the
strengthening of the remaining
companies, particularly in the plasma-derived sector.
Proprietary Products Segment
There are a limited number
of direct competitors for each of our products in the Proprietary Products segment. These competitors include CSL
Behring, Grifols (which
acquired Biotest AG during 2022), Kedrion (other than for KEDRAB) (which merged with BPL during 2022), and ADMA. Most
of these companies
are multinational corporations that specialize in plasma derived protein therapeutics and distribute their plasma derived pharmaceutical
products worldwide. We have not seen significant changes in the activities of our competitors in recent years. Additionally, our strategic
alliance with
Kedrion in the United States has strengthened our KEDRAB competitive positioning in the market. The acquisition of Biotest
by Grifols and the merger
between Kedrion and BPL might impact the markets that we operate in. In some international markets, such as
India, Thailand and Russia, we also have
local competitors for KAMRAB and KAMRHO (D).
In addition, we face potential
competition from other biopharmaceutical companies that develop and market non-plasma derived products that are
approved for similar indications
as those in our Proprietary Products segment.
In cases of existing competition,
our competitors usually have advantages in the market because of their size, financial resources, plasma-
collection capacity, and the
duration of their activities and experience in the relevant market, especially in the United States and countries of the European
Union.
The following describes details
known to us about our most significant competitors for each of our main Proprietary Products segment products.
KEDRAB/KAMRAB. We believe
that there are two main competitors for this anti-rabies IgG product worldwide: Grifols, whose product we
estimate comprises over 50%
of the anti-rabies IgG market in the United States, and CSL Behring, which sells its anti-rabies product in Europe and other
international
markets. Sanofi Pasteur, the vaccines division of Sanofi S.A., exited the U.S. anti-rabies IgG market as well as some additional international
markets during 2022. We believe that such departure, among other things, contributed to the increase in demand for KEDRAB in the United
States in 2023
and 2024. BPL, which has an anti-Rabies IgG product for the UK market, has developed it also for the U.S. market, including
performing a clinical trial;
however, it did not complete the product development and has not submitted a BLA for FDA approval. There
are several local producers in other countries
that make anti-rabies IgG products, mostly based on equine serum, which we believe results
in inferior products, as compared to products made from
human plasma. Over the past several years, several companies have made attempts,
and some are still in the process of developing monoclonal antibodies
for anti-rabies treatment. The first monoclonal antibody product
was approved and is available in India, and the second monoclonal antibody product was
approved and is available in China and to our understanding,
is intended to be submitted for marketing authorization in other countries. These products may
be as effective as the currently available
plasma derived anti-rabies immunoglobulin and may potentially be cheaper, and as such may result in the future in
increased competition
and potential loss of market share of KEDRAB/KAMRAB.
64
CYTOGAM. To our knowledge,
CYTOGAM is the only plasma derived CMV IgG product approved in the United States and Canada. In Europe
and other international markets
Cytotec CP/Megalotect (Biotest), a plasma derived competing product, is available. Based on available public information,
the FDA approved
the following non-plasma derived antiviral drugs for the prevention of CMV infection and disease: Letermovir (Prevymis), developed
by
Merck& Co., and for treatment of refractory/resistant infection or disease Maribavir (Livtencity), developed by Takeda. Since their
launch, these
products have resulted in a significant loss of market share for CYTOGAM. Currently, treatment guidelines state that combination
therapy with standard
antiviral can be considered for certain solid organ transplant recipients. The most used antivirals are Ganciclovir
(Cytovene-IV Roche) and Valgnciclovir
(Valcyte Roche). Patients treated with such antivirals agents for a long time can develop resistance
and will require a second-line treatment such as
Foscarnet (Foscavir Pfizer) or Cidofovir (Gilead Sciences). Despite the introduction
of newer antiviral therapies for CMV in solid organ transplantation,
there is a growing need to determine the optimal approach of CMV
management when considering all available therapies, including CYTOGAM.
GLASSIA. There are
several competing products to GLASSIA. Grifols, CSL Behring and Takeda have competing plasma derived AAT products
approved for AATD that
are marketed in the United States, as well as in some European countries and registered in Canada. We estimate that Prolastin,
Grifols’
AAT infusion product for the treatment of AATD, accounts for at least 50% market share in the United States and more than 70% of sales
worldwide. In September 2017, Grifols announced FDA approval of a liquid formulation of Prolastin, and to the best of our knowledge, Grifols’s
liquid
product is currently only sold in the U.S. market and Grifols may in the future expand its sales of this product to ex-U.S. markets
as well. Grifols is also a
producer of an additional AAT product, Trypsone, which is marketed in Spain and in some Latin American countries,
including Brazil. CSL Behring’s AAT
by IV product, Zemaira, is mainly sold in the United States, and during 2015 received centralized
marketing authorization approval in the European Union.
CSL Behring launched the product in a few selected EU markets stating 2016 under
the brand name Respreeza. Takeda is our strategic partner for sales of
GLASSIA in the United States and Canada and it also serves existing
patients in the United States with its own proprietary AAT product, Aralast. As far as
we know, Takeda is selling both products in the
United States and maintaining existing patients on Aralast. Laboratoire Français du Fractionnement et des
Biotechnologies, S.A.
(LFB) is a producer of an AAT product distributed only in the French market. We do not believe that new plasma derived AAT
products are
expected to enter the U.S. or European markets in the near future.
There are several other competitors
in pre-clinical and clinical stages, such as Sanofi, Mereo and Wave therapeutics, and potentially others, all of
which have clinical stage
development programs for new medications for treatment of AATD lung disease. Additional companies have pre-clinical stage
development
programs, such as Apic Bio, Intellia, AlveoGene, and Tessera Thrapeutics, all of which are include gene editing technologies. Preclinical
phase programs do not always progress to advanced clinical development stages. These product candidates, if approved, may have an adverse
effect on the
AATD market size and reduce or eliminate the need for the currently approved plasma derived AAT augmentation therapy, and
thus may potentially affect
our ability to continue to generate revenues and earnings from GLASSIA. In addition, if approved, these product
candidates may have a negative effect on
our ability to continue the development of our Inhaled AAT, and, if approved, to market Inhaled
AAT and obtain a meaningful market share.
WINRHO SDF. WINRHO
SDF, an Anti-D IgG product (also called Rhₒ(D) IgG), which is registered in the United States, competes with
corticosteroids (oral
prednisone or high-dose dexamethasone) and IVIG as first or second line treatment for acute ITP. Grifols, CSL Behring, Takeda,
Kedrion
and Octapharma are the main IVIG manufacturers and suppliers in the United States. IVIG or WINRHO SDF are recommended for pediatric
patients
in whom corticosteroids are contraindicated. Rhophylac, a competing Anti-D IgG from CSL Behring, is also approved for ITP treatment, but
we
believe it is mostly used for HDN, due to its smaller vial size. Outside the United States, WINRHO SDF is used for HDN indication.
The market in ex-U.S.
countries is usually led by tenders, where key indicators are registration status and price. Our main competitors
in those countries are RhoGAM (Kedrion),
Hyper RHO (Grifols) and Rhophylac (CSL Behring). Our KAMRHO (D) is a similar product to WINRHO
SDF, however, since the two products are
registered in different countries, they do not directly compete.
HEPAGAM B. To our knowledge,
HEPAGAM B is the only approved HBIG in the United States with an on-label indication for liver transplants.
To our understanding, HEPAGAM
B holds the majority market share for the indication, although another HBIG, Nabi-HB (manufactured and supplied by
ADMA) is used off-label
by some medical centers for the indication. New generation antivirals are considered effective for preventing HBV reactivation
post-transplant,
thereby reducing HBIG use. PEP indication in the United States is covered almost totally by Nabi-HB (ADMA) and HyperHEP (Grifols).
In
Canada, the main competition in national tenders is HypeHEP. In other territories, such as Turkey, the MENA region, and in Israel, HEPATECT
CP and
Zutectra (Biotest AG) are the main competitors.
VARIZIG. To our knowledge,
VARIZIG is the only plasma derived Varicella-Zoster IgG product approved in the United States and Canada. In
Europe and other international
markets, VARITECT (Biotest AG) and additional plasma derived competing products are available. In the United States,
incidence of VZV
infection has significantly decreased since the introduction of the varicella vaccine in 1995. While the vaccine has lowered the
occurrence
of chickenpox, the virus has not been eradicated, and the incidence of Herpes Zoster, also caused by VZV, is rising among adults in the
United
States. Suboptimal vaccination rates contribute to outbreaks and increased risk of VZV exposure. Immunocompromised individuals
and other patient
groups are at high risk for severe varicella and complications after being exposed to VZV. VARIZIG is recommended by
the CDC for post-exposure
prophylaxis of varicella in persons at high risk for severe varicella and complications who lack evidence of
immunity to varicella. If VARIZIG is
unavailable, the CDC recommends IVIG, and some experts recommend Acyclovir or Valacyclovir, although
published data on their benefits as post-
exposure prophylaxis among immunocompromised individuals are limited.
65
KAMRHO(D). We market
KAMRHO (D) for HDN, mainly in Israel, Argentina and Chile. Kedrion is one of our competitors for KAMRHO (D) in
some of those international
markets. We believe there are currently two additional main suppliers of competitive products, Grifols and CSL Behring. There
are also
local producers in other countries that make similar products which are mostly intended for local markets.
Government Regulation
Government authorities in
the United States, at the federal, state and local level, and in other countries extensively regulate, among other things,
the research,
development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising,
distribution,
post-approval monitoring and reporting, marketing and export and import of products such as those we sell and are developing. Except for
compassionate use or non-registered named-patient cases, any pharmaceutical candidate that we develop must be approved by the FDA before
it may be
legally marketed in the United States and by the appropriate regulatory agencies of other countries before it may be legally
marketed in such other
countries. In addition, any changes or modifications to an approved biological product that has the potential to
have an adverse effect on the product’s
safety or effectiveness may require approval or review from regulatory authorities in the
United States and/or in other countries. The process of obtaining
such approvals or submitting required notifications can be expensive,
time consuming and uncertain.
U.S. Drug Development Process
In the United States, pharmaceutical
products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act and other laws,
including, in the case of biologics,
the Public Health Service Act. All of our products for human use and product candidates in the United States, are
regulated by the FDA
as biologics. Biologics require the submission of a BLA and approval by the FDA prior to being marketed in the United States.
Manufacturers
of biologics may also be subject to state regulation. Failure to comply with regulatory requirements, both before and after product approval,
may subject us and/or our partners, contract manufacturers and suppliers to administrative or judicial sanctions, including FDA delay
or refusal to approve
applications, warning letters, product recalls, product seizures, import restrictions, total or partial suspension
of production or distribution, fines and/or
criminal prosecution.
The steps required before
a biologic drug may be approved for marketing for an indication in the United States generally include:
1.
preclinical in-vitro and potentially also in-vivo tests;
2.
submission to the FDA of an IND application for human clinical testing, including required CMC sections, which must become effective
before human clinical trials may commence;
3.
adequate and well-controlled human clinical trials to establish the safety and efficacy of the product;
4.
submission to the FDA of a BLA, with all the required information;
5.
FDA pre-approval inspection of product manufacturers; and
6.
FDA review and approval of the BLA.
Preclinical studies include
laboratory evaluation and in-vitro studies, and may include in vivo animal studies, which assess the potential safety and
efficacy of
the product candidate. Preclinical safety tests must be conducted in compliance with FDA regulations regarding good laboratory practices.
The
results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of
an IND which must become
effective before human clinical trials may be commenced. The IND will automatically become effective 30 days
after receipt by the FDA, unless the FDA
before that time raises concerns about the drug candidate or the conduct of the trials as outlined
in the IND. The IND sponsor and the FDA must resolve
any outstanding concerns before clinical trials can proceed. There can be no assurance
that submission of an IND will result in FDA authorization to
commence clinical trials or that, once commenced, other concerns will not
arise, that could lead to a delay or a hold on the clinical trials.
Clinical trials involve the
administration of the investigational product to healthy volunteers or to patients, under the supervision of qualified
principal investigators.
Each clinical study at each clinical site must be reviewed and approved by an independent institutional review board, prior to the
recruitment
of subjects. Numerous requirements apply including, but not limited to, good clinical practice regulations, privacy regulations, and
requirements
related to the protection of human subjects, such as informed consent.
Clinical trials are typically
conducted in three sequential phases, but the phases may overlap, and different trials may be initiated with the same
drug candidate within
the same phase of development in similar or differing patient populations.
●
Phase 1 studies may be conducted in a limited number of patients but are usually conducted in healthy volunteer subjects. The drug is usually
tested for safety and, as appropriate, for absorption, metabolism, distribution, excretion, pharmacodynamics and pharmacokinetics.
66
●
Phase 2 usually involves studies in a larger, but still limited, patient population to evaluate preliminarily the efficacy of the drug candidate for
specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible short-term adverse effects and safety
risks.
●
Phase 3 trials are undertaken to further evaluate clinical efficacy of a specific endpoint and to test further for safety within an expanded
patient population at geographically dispersed clinical study sites.
Phase 1, Phase 2 or Phase
3 testing may not be completed successfully within any specific time period, if at all, with respect to any of our product
candidates.
Results from one trial are not necessarily predictive of results from later trials. The FDA may require additional testing or a larger
pool of
subjects beyond what we proposed as the clinical development process proceeds, thereby requiring more time and resources to complete
the trials.
Furthermore, the FDA may suspend clinical trials at any time on various grounds, including a finding that the subjects or
patients are being exposed to an
unacceptable health risk, or may not allow the importation of the clinical trial materials if there is
non-compliance with applicable laws.
The results of the preclinical
studies and clinical trials, together with other detailed information, including information on the manufacture and
composition of the
product, are submitted to the FDA as part of a BLA requesting approval to market the product candidate for a proposed indication.
Under
the Prescription Drug User Fee Act, as amended, the fees payable to the FDA for reviewing a BLA, as well as annual fees for commercial
manufacturing establishments and for approved products, can be substantial. The BLA review fee alone can exceed $4,300,000, subject to
certain limited
deferrals, waivers and reductions that may be available. Each BLA submitted to the FDA for approval is typically reviewed
for administrative
completeness and reviewability within 45 to 60 days following submission of the application. If found complete, the
FDA will “file” the BLA, thus
triggering a full review of the application. The FDA may refuse to file any BLA that it deems
incomplete or not properly reviewable at the time of
submission. The FDA’s established goals are to review and act on 90% of priority
BLA applications and priority original efficacy supplements within six
months of the 60-day filing date and receipt date, respectively.
The FDA’s goals are to review and act on 90% of standard BLA applications and standard
original efficacy supplements within 10 months
of the 60-day filing date and receipt date, respectively. The FDA, however, may not be able to approve a
drug within these established
goals, and its review goals are subject to change from time to time. Further, the outcome of the review, even if generally
favorable,
may not be an actual approval but an “action letter” that describes additional work that must be done before the application
can be approved.
Before approving a BLA, the FDA may inspect the facilities at which the product is manufactured or facilities that are
significantly involved in the product
development and distribution process and will not approve the product unless cGMP compliance is
satisfactory. The FDA may deny approval of a BLA if
applicable statutory or regulatory criteria are not satisfied, or may require additional
testing or information, which can delay the approval process. FDA
approval of any application may include many delays or never be granted.
If a product is approved, the approval will impose limitations on the indicated
uses for which the product may be marketed, will require
that warning statements be included in the product labeling, may impose additional warnings to
be specifically highlighted in the labeling
(e.g., a Black Box Warning), which can significantly affect promotion and sales of the product, will likely require
that additional studies
be conducted following approval as a condition of the approval, may impose restrictions and conditions on product distribution,
prescribing
or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. To market a product for other uses,
or to
make certain manufacturing or other changes requires prior FDA review and approval of a BLA Supplement or new BLA. Further post-marketing
testing
and surveillance to monitor the safety or efficacy of a product is required. Also, product approvals may be withdrawn if compliance
with regulatory
standards is not maintained or if safety or manufacturing problems occur following initial marketing. In addition, new
government requirements may be
established that could delay or prevent regulatory approval of our product candidates under development.
As part of the Patient Protection
and Affordable Care Act (the “healthcare reform law”), Public Law No. 111-148, under the subtitle of Biologics
Price Competition
and Innovation Act of 2009 (“BPCIA”), a statutory pathway has been created for licensure, or approval, of biological products
that are
biosimilar to, and possibly interchangeable with, earlier biological products approved by the FDA for sale in the United States.
Also, under the BPCIA,
innovator manufacturers of original reference biological products are granted 12 years of exclusivity before biosimilars
can be approved for marketing in
the United States, which protects an innovator from competitors using the innovator’s own clinical
data to gain approval of a competing product. There
have been proposals to shorten this period from 12 years to five years. The objectives
of the BPCI are conceptually similar to those of the Drug Price
Competition and Patent Term Restoration Act of 1984, commonly referred
to as the “Hatch-Waxman Act,” which established abbreviated pathways for the
approval of drug products. A biosimilar is defined
in the statute as a biological product that is highly similar to an already approved biological product,
notwithstanding minor differences
in clinically inactive components, and for which there are no clinically meaningful differences between the biosimilar
and the approved
biological product in terms of the safety, purity, and potency. Under this approval pathway, biological products can be approved based
on
demonstrating they are biosimilar to, or interchangeable with, a biological product that is already approved by the FDA, which is called
a reference
product. If we obtain approval of a BLA, the approval of a biologic product biosimilar to one of our products could have a
significant impact on our
business. The biosimilar product may be significantly less costly to bring to market and may be priced significantly
lower than our products.
Both before and after the
FDA approves a product, the manufacturer and the holder or holders of the BLA for the product are subject to
comprehensive regulatory
oversight. For example, quality control and manufacturing procedures must conform, on an ongoing basis, to cGMP
requirements, and the
FDA periodically inspects manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to
spend time,
money and effort to maintain cGMP compliance. In addition, a BLA holder must comply with post-marketing requirements, such as reporting
of certain adverse events. Such reports can present liability exposure, as well as increase regulatory scrutiny that could lead to additional
inspections,
labeling restrictions, or other corrective action to minimize further patient risk.
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Special Development and Review Programs
Orphan Drug Designation
The FDA may grant orphan drug
designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in
the United States, or
if it affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and
making the drug for this type of disease or condition will be recovered from sales in the United States. In the United States, orphan
drug designation must
be requested before submitting a BLA.
In the European Union, the
European Commission, upon a recommendation from the EMA’s Committee for Orphan Medicinal Products grants
orphan drug designation
to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or
chronically
debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, this designation is granted
for
products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic
condition and when, without
incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the
necessary investment in developing the drug or
biological product.
We received an orphan drug
designation in the United States and Europe for multiple indications. Inhaled AAT for AATD has received an orphan
drug designation in
the United States and Europe. The inhaled formulation of AAT for the treatment of cystic fibrosis has received an orphan drug
designation
in the United States and Europe. The inhaled formulation of AAT for the treatment of bronchiectasis has received an orphan drug designation
in
the United States. The additional indication for GLASSIA for the treatment of newly diagnosed cases of Type-1 Diabetes has received
an orphan drug
designation in the United States. In addition, the indication for AAT for the treatment of Graft versus Host Disease has
received an orphan drug designation
in the United States and Europe, and the indication for AAT for the treatment of Prophylactic Graft
versus Host Disease has received an orphan drug
designation in the United States.
In the United States, orphan
drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial
costs, tax advantages
and user-fee waivers. In addition, if a product and its active ingredients receive the first FDA approval for the indication for which
it
has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application
to market the same
drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical
superiority over the product with
orphan exclusivity. Orphan drug designation itself does not convey any advantage in, or shorten the
duration of, the regulatory review and approval
process. In addition, the FDA may rescind orphan drug designation and, even with designation,
may decide not to grant orphan drug exclusivity even if a
marketing application is approved. Furthermore, the FDA may approve a competitor
product intended for a non-orphan indication, and physicians may
prescribe the drug product for off-label uses, which can undermine exclusivity
and hurt orphan drug sales. There has also been litigation that has challenged
the FDA’s interpretation of the orphan drug exclusivity
regulatory provisions, which could potentially affect our ability to obtain exclusivity in the future.
In the European Union, orphan
drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years
of market exclusivity
is granted following drug or biological product approval. This period may be reduced to six years if, at the end of the fifth year, it
is
established that the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently
profitable not to justify
maintenance of market exclusivity. Furthermore, marketing authorizations can be granted at any time for similar,
but safer, more effective or otherwise
clinically superior products even if another medical product has market exclusivity.
In the European Union, an
application for marketing authorization can be submitted after the application for orphan drug designation has been
submitted, while the
designation is still pending. However, only medicinal products that have already received their orphan designation are eligible for a
fee
reduction. Orphan drug designation does not convey any advantage in, except eligibility to conditional approval process, or shorten
the duration of, the
regulatory review and approval process.
Post-Approval Requirements
Any drug products for which
we receive FDA approvals are subject to continuing regulation by the FDA. Certain requirements include, among
other things, record-keeping
requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy
information on an
annual basis or more frequently for specific events, product sampling and distribution requirements, complying with certain electronic
records and signature requirements and complying with FDA promotion and advertising requirements. These promotion and advertising requirements
include, among others, standards for direct-to-consumer advertising, prohibitions against promoting drugs for uses or in patient populations
that are not
described in the drug’s approved labeling (known as “off-label use”), and other promotional activities.
We are also required to ensure that non-promotional
scientific exchanges concerning our products are truthful and non-misleading. Failure
to comply with FDA requirements can have negative consequences,
including the immediate discontinuation of noncomplying materials, adverse
publicity, warning letters from or other enforcement by the FDA, mandated
corrective advertising or communications with doctors, and civil
or criminal penalties. Such enforcement may also lead to scrutiny and enforcement by
other government and regulatory bodies. Although
physicians may prescribe legally available drugs for off-label uses, manufacturers may not encourage,
market or promote such off-label
uses.
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The manufacturing of our product
candidates is required to comply with applicable FDA manufacturing requirements contained in the FDA’s
cGMP regulations. Our product
candidates are either manufactured at our production plant in Beit Kama, Israel, or, for products where we have entered
into a strategic
partnership with a third party to cooperate on the development of a product candidate, at a third-party manufacturing facility. These
regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of comprehensive
records and
documentation. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are also
required to register their
establishments and list any products they make with the FDA and to comply with related requirements in certain
states. These entities are further subject to
periodic unannounced inspections by the FDA and certain state agencies for compliance with
cGMP and other laws. Accordingly, manufacturers must
continue to expend time, money and effort in the area of production and quality control
to maintain cGMP compliance. Discovery of problems with a
product after approval may result in serious and extensive restrictions on a
product, manufacturer or holder of an approved new drug application (NDA) or
BLA, as well as lead to potential market disruptions. These
restrictions may include suspension of a product until the FDA is assured that quality standards
can be met, continuing oversight of manufacturing
by the FDA under a “consent decree,” which frequently includes the imposition of costs and continuing
inspections over a period
of many years, as well as possible withdrawal of the product from the market. In addition, changes to the manufacturing process
generally
require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and
additional labeling claims, are also subject to further FDA review and approval, including possible user fees.
The FDA also may require a
Boxed Warning (e.g., a specific warning in the label to address a specific risk, sometimes referred to as a “Black Box
Warning”),
which has marketing restrictions, and post-marketing testing, or Phase 4 testing, as well as a Risk Evaluation and Minimization Strategy
(REMS) plans and surveillance to monitor the effects of an approved product or place conditions on an approval that could otherwise restrict
the
distribution or use of the product.
Other U.S. Healthcare Laws and Compliance
Requirements
In the United States, our activities
are subject to regulation and enforcement by various federal, state and local authorities, such as the FDA, the
Centers for Medicare &
Medicaid Services, the Department of Health and Human Services Office of Inspector General, the U.S. Federal Trade
Commission, the U.S.
Department of Justice and individual United States Attorney’s offices within the Department of Justice, and state attorneys general.
To the extent applicable, we must comply with the fraud and abuse provisions of the Social Security Act, the federal Anti-Kickback Statute,
the False
Claims Act, both federal and state physician sunshine acts, the privacy and security provisions of HIPAA, and similar state
laws governing the use,
disclosure, privacy, and security of health information. Pricing and rebate programs must comply with the Medicaid
rebate requirements of the Omnibus
Budget Reconciliation Act of 1990 and the VHCA, each as amended. Certain pricing and rebate provisions
of the IRA may require additional pricing
disclosure and discount obligations for our products. If products are made available to authorized
users of the Federal Supply Schedule of the General
Services Administration, additional laws and requirements apply. Under the Veterans
Health Care Act (“VHCA”), drug companies are required to offer
certain pharmaceutical products at a reduced price to a number
of federal agencies, including the United States Department of Veterans Affairs and United
States Department of Defense, the Public Health
Service and certain private Public Health Service-designated entities in order to participate in other federal
funding programs including
Medicare and Medicaid. Under the TRICARE Retail Pharmacy Program, drug manufacturers must pay rebates to the United
States Department
of Defense for drugs provided by TRICARE retail network pharmacies to program beneficiaries. Participation under the VHCA requires
submission
of pricing data and calculation of discounts and rebates pursuant to complex statutory formulas, as well as the entry into government
procurement contracts governed by the Federal Acquisition Regulations. Furthermore, the FCPA prohibits any U.S. individual or business
from paying,
offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political
party or candidate for the purpose of
influencing any act or decision of the foreign entity in order to assist the individual or business
in obtaining or retaining business. The FCPA presents
unique challenges in the pharmaceutical industry, because, in many countries, hospitals
are operated by the government, and doctors and other hospital
employees are considered foreign officials. Certain payments to hospitals
in connection with clinical trials and other work have been deemed to be
improper payments to government officials and have led to FCPA
enforcement actions. The failure to comply with laws governing international business
practices may result in substantial penalties, including
civil and criminal penalties.
69
In order to distribute products
commercially, we must comply with federal and state laws and regulations that require the registration of
manufacturers and wholesale
distributors of pharmaceutical products. In certain states, manufacturers and distributors ship products into the state, even if
such
manufacturers or distributors have no place of business within the state. Certain federal and state laws also impose requirements on
manufacturers and
distributors to establish the pedigree of product in the chain of distribution, including the use of technology capable
of tracking and tracing product as it
moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical
companies to establish marketing compliance
programs, file periodic reports with the state, make periodic public disclosures on sales,
marketing, pricing, clinical trials and other activities, register their
sales representatives, as well as prohibit certain other sales
and marketing practices. Additionally, the federal Physician Payments Sunshine Act and
implementing regulations promulgated pursuant
to Section 6002 of the healthcare reform law requires the tracking and reporting of certain transfers of
value made to certain healthcare
practitioners and teaching hospitals as well as ownership by a physician or a physician’s family member in a
pharmaceutical manufacturer.
Physician Payments Sunshine Act requirements were expanded in January 2021 to include physician assistants, nurse
practitioners, clinical
nurse specialists, certified registered nurse anesthetists and anesthesiologist assistants, and certified nurse-midwives as covered
recipients.
Finally, all of our activities are potentially subject to federal and state consumer protection and unfair competition laws. These laws
may affect
our sales, marketing, and other promotional activities by imposing administrative and compliance burdens. In addition, given
the lack of clarity with
respect to these laws and their implementation, our reporting actions could be subject to the penalty provisions
of the pertinent state, and federal authorities.
Europe/Rest of World Government Regulation
In addition to regulations
in the United States, we are subject to a variety of regulations in other jurisdictions governing, among other things,
clinical trials
and any commercial sales and distribution of our products.
Whether or not we obtain FDA
approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign
countries before we can
commence clinical trials or marketing of the product in those countries. For example, in the European Union, a clinical trial
application
(“CTA”) should now be submitted using the new Centralized procedure under the clinical trial regulation (EU) no. 536/2014,
CTR, that
replaces the CTA to each member state’s national health authority and to an independent ethics committee. The CTA must
be approved by the national
health authority and the independent ethics committee prior to the commencement of a clinical trial in the
member state. The requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from
country to country. In all cases, clinical trials are conducted in
compliance with GCP and the applicable EU and national regulatory requirements
and the ethical principles that have their origin in the Declaration of
Helsinki. In the United Kingdom, following BREXIT, a separate
CTA is required for central union countries, and approval for clinical trials must be
obtained from the Medicines and Healthcare products
Regulatory Agency in the United Kingdom (“MHRA”) and the appropriate ethics committee.
To obtain marketing approval
of a drug under European Union regulatory systems, we may submit marketing authorization applications either
under a centralized, decentralized
or national procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid
for all European
Union and EEA member states. The centralized procedure is compulsory for medicines produced by certain biotechnological processes,
products
designated as orphan medicinal products, and products with a new active substance indicated for the treatment of certain diseases, and
optional for
those products that are highly innovative or for which a centralized process is in the interest of patients. For our products
and product candidates that have
received or will receive orphan designation in the European Union, they will qualify for this centralized
procedure, under which each product’s marketing
authorization application will be submitted to the EMA. Under the centralized procedure
in the European Union, the maximum time frame for the
evaluation of a marketing authorization application is 210 days (excluding clock
stops, when additional written or oral information is to be provided by the
applicant in response to questions asked by the Scientific
Advice Working Party of the CHMP). Accelerated evaluation might be granted by the CHMP in
exceptional cases, when a medicinal product
is expected to be of a major public health interest particularly from the point of view of therapeutic innovation
which is assessed on
a case-by-case basis. In this circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days.
The decentralized procedure
provides possibility for approval by several member states following the assessment of an application performed by
one member state, known
as the reference member state. Under this procedure, an applicant submits an application, or dossier, and related materials,
including
a draft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member
states.
The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a
valid application. Within 90
days of receiving the reference member state’s assessment report, each concerned member state must
decide whether to approve the assessment report and
related materials. If a member state cannot approve the assessment report and related
materials on the grounds of potential serious risk to public health, the
disputed points may eventually be referred to the EMA. The European
Commission, based on the EMA’s report, will then issue a decision that is binding
on all member states. Currently, following BREXIT,
the UK is regulated by the MHRA as the regulatory leading body, which necessitates the submission
of an individual marketing authorization;
however, the MHRA can recognize an EMA approval for an MAA through an international recognition
procedure. Additionally, the EU General
Data Protection Regulation (“GDPR”) and UK GDPR, which may apply to our clinical development operations
and other personal
data we process, imposes strict requirements for processing personal data.
For other countries outside
of the European Union, such as the UK, Israel, and countries in, Eastern Europe, Latin America and Asia, the
requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the
clinical
trials are conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles that have their origin
in the
Declaration of Helsinki. Additionally, these countries also impose privacy and data security requirements relevant to the processing
of clinical trial and
other personal data with which we are required to comply.
If we fail to comply with
applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of
regulatory approvals,
product recalls, seizure of products, operating restrictions and criminal prosecution.
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Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists
as to the coverage and reimbursement status of product candidates for which we obtain regulatory approval. In the
United States and markets
in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on
the coverage
and reimbursement decisions made by payors. In the United States, third-party payors include government health administrative authorities,
managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage
for a drug
product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product.
Payors may limit
coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved
drug products for a particular
indication. Third-party payors are increasingly challenging the price and examining the medical necessity
and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic
studies in order to demonstrate the medical
necessity and cost-effectiveness of our products, in addition to the costs required to obtain
the FDA approvals. Our product candidates may not be
considered medically necessary or cost-effective. A payor’s decision to provide
coverage for a drug product does not imply that an adequate reimbursement
rate will be approved. Adequate third-party reimbursement may
not be available to enable us to maintain price levels sufficient to realize an appropriate
return on our investment in product development.
Several significant laws have
been enacted in the United States which affect the pharmaceutical industry and additional federal and state laws have
been proposed in
recent years. For example, the IRA includes several provisions to lower prescription drug costs for people with Medicare and reduce drug
spending by the federal government, including allowing Medicare to negotiate prices for certain prescription drugs, requiring drug manufacturers
to pay a
rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all
covered drugs under Part D
increase faster than the rate of inflation (CPI-U), and limiting out of pocket spending for Medicare Part D
enrollees. Additional legislative and state reform
efforts present uncertainty around restrictions that may be imposed on pricing for
our products, as well as regulatory compliance issues.
Federal, state and local governments
in the United States continue to consider legislation to limit the growth of healthcare costs, including the cost
of prescription drugs.
Future legislation and regulation could further limit payments for pharmaceuticals such as the product candidates that we are
developing.
In addition, court decisions have the potential to affect coverage and reimbursement for prescription drugs. It is unclear whether future
legislation, regulations or court decisions will affect the demand for our product candidates once commercialized.
Different pricing and reimbursement
schemes exist in other countries. In the European Union, governments influence the price of pharmaceutical
products through their pricing
and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to
consumers.
Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has
been
agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of benefit assessments of
medicinal products that
compare the cost-effectiveness of a particular product candidate to currently available therapies. Other member
states allow companies to fix their own
prices for medicines but monitor and control company profits. The downward pressure of healthcare
costs in general, particularly prescription drugs, has
become very intense. As a result, increasingly high barriers are being erected
to the entry of new products. In addition, in some countries, cross-border
imports from low-priced markets exert a commercial pressure
on pricing within a country.
The marketability of any drug
candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-
party payors fail to provide
adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect
will continue
to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even
if
favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage
policies and reimbursement rates may be implemented in the future.
Intellectual Property
Our success depends, at least
in part, on our ability to protect our proprietary technology and intellectual property, and to operate without
infringing or violating
the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws, know-how,
intellectual
property licenses and other contractual rights (including confidentiality and invention assignment agreements) to protect our intellectual
property rights.
Patents
As of December 31, 2024, we
owned for use within our field of business 13 patents and patent applications, most of which are granted or pending,
respectively, in
the United States, Europe, Canada and Israel and some were additionally filed in Russia, Turkey, certain Latin American countries,
Australia
and other countries, including four pending PCT applications. We own a patent family protecting pulmonary delivery of AAT, filed in 2007,
in a
variety of jurisdictions, including Canada, Germany, France, Italy, Netherlands, Ireland, Belgium, Great Britain, Israel, Russia
and Mexico. Furthermore,
we own a patent family filed in 2018, protecting our manufacturing process of immunoglobulins. This patent family
includes an allowed application in the
U.S. and pending applications in Canada, Europe and Israel.
Our patents generally relate
to the separation and purification of proteins and their respective pharmaceutical compositions. Our patents and patent
applications further
relate to the use of our products for a variety of clinical indications, and their delivery methods. Our patent applications further relate
to
the production of recombinant AAT-1 and uses thereof for clinical indications. Our patent applications further relate to the system
and method for
purification of immunoglobulins from a biological sample, and to the use of acellular plasma for various indications. Our
patents and patent applications
are expected to expire at various dates between 2027 and 2044. We also rely on trade secrets to protect
certain aspects of our separation and purification
technology.
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The patent positions of companies
like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and
solidify our proprietary
position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We
do not
know whether any of our patent applications or any patent applications that we license will result in the issuance of any patents and
there is no
guarantee that patent applications that were filed with the patent offices, which are still pending, will be eventually granted
and will be registered.
Additionally, our issued patents and those that may be issued in the future may be challenged, opposed, narrowed,
circumvented or found to be invalid or
unenforceable, which could limit our ability to stop competitors from marketing related products
or the length of term of patent protection that we may
have for our products. We cannot be certain that we were the first to file the
inventions claimed in our owned patents or patent applications. In addition, our
competitors or other third parties may independently
develop similar technologies that do not fall within the scope of the technology protected under our
patents, or duplicate any technology
developed by us, and the rights granted under any issued patents may not provide us with any meaningful competitive
advantages against
these competitors. Furthermore, because of the extensive time required for research and development, testing and regulatory review of
a
potential product until authorization for marketing, it is possible that, before any of our products can be commercialized, any related
patent may expire or
remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.
Trademarks
We rely on trade names, trademarks
and service marks to protect our name brands. Our registered trademarks in several countries, such as United
States and the European Union,
Israel, and certain Latin American countries, include the trademarks CYTOGAM, GLASSIA, HEPAGAM, HEPAGAM B,
KAMRAB, KEDRAB, KAMADA, KAMRHO,
KAMRHO-D, KAMRHO-D IM, KR (design mark), REBINOLIN, РЕБИНОЛИН (Rebinolin in Cyrillic),
RESPIKAM,
KAMADA RESPIRA, VARIZIG, VENTIA, WINRHO and WINRHO SDF.
Trade Secrets and Confidential Information
We rely on, among other things,
confidentiality and invention assignment agreements to protect our proprietary know-how and other intellectual
property that may not be
patentable, or that we believe is best protected by means that do not require public disclosure. For example, we require our
employees,
consultants and service providers to execute confidentiality agreements in connection with their engagement with us. Under such agreement,
they are required, during the term of the commercial relationship with us and thereafter, to disclose and assign to us inventions conceived
in connection
with their services to us. However, there can be no assurance that these agreements will be fulfilled or shall be enforceable,
or that these agreements will
provide us with adequate protection. See “Item 3. Key Information — D. Risk Factors —
In addition to patented technology, we rely on our unpatented
proprietary technology, trade secrets, processes and know-how.”
We may be unable to obtain,
maintain and protect the intellectual property rights necessary to conduct our business, and may be subject to claims
that we infringe
or otherwise violate the intellectual property rights of others, which could materially harm our business. For a more comprehensive
summary
of the risks related to our intellectual property, see “Item 3. Key Information — D. Risk Factors.”
Environmental
We believe that our operations
comply in material respects with applicable laws and regulations concerning the environment. While it is
impossible to predict accurately
the future costs associated with environmental compliance and potential remediation activities, compliance with
environmental laws is
not expected to require significant capital expenditures and has not had, and is not expected to have, a material adverse effect on our
earnings or competitive position. For more information see “Item 3. Key Information —D. Risk Factors — Risks Related
to Our Operations and Industry –
We are subject to extensive environmental, health and safety, and other laws and regulations.”
We are committed to business
practices that promote socially and environmentally responsible economic growth. In 2024, we continued to make
meaningful progress on
our sustainability strategy.
C. Organizational
Structure
Our subsidiaries are set forth
below. All subsidiaries are either wholly owned by us or controlled by us. All companies are incorporated and
registered in the country
in which they operate as listed below:
Legal Name
Jurisdiction
KI Biopharma LLC
Delaware, USA
Kamada Inc.
Delaware, USA
Kamada Plasma LLC
Delaware, USA (wholly owned by Kamada Inc.)
Kamada Assets (2001) Ltd.
Israel
Kamada Ireland Limited
Ireland
D. Property,
Plants and Equipment
Our production plant located
in Beit Kama, Israel, was built on land that Kamada Assets (2001) Ltd. (“Kamada Assets”), our 74%-owned Israeli
subsidiary,
leases from the Israel Land Administration pursuant to a capitalized long-term lease. Kamada Assets subleases the property to us. The
property
originally covered an area of approximately 16,880 square meters. The initial sublease expires in 2058, and we have an option
to extend the sublease for an
additional term of 49 years. On November 1, 2021, pursuant to a new area outline approved by the Israel
Lands Administration, the covered area was
reduced to 14,880 square meters. The production plant includes our manufacturing facility,
manufacturing support systems, packaging, warehousing and
logistics areas and laboratory facilities, as well as office buildings.
72
In addition, we lease approximately
2,200 square meters of office and laboratory facility at a building located in the Kiryat Weizmann Science
Park in Rehovot, Israel. This
property houses our corporate office, research and development laboratory and additional departments such as clinical
operations, medical,
regulatory affairs, compliance, sales and marketing and business development. The current lease agreement is in effect until January
2032.
We own a 237 square meters
facility in Beaumont, TX that we acquired in March 2021, which serves as an FDA registered plasma collection
center.
In addition, our U.S. subsidiary
Kamada Inc. leases approximately 1500 square feet of office space within a shared office facility in Hoboken, NJ.
The lease is based on
a month-to-month agreement which automatically renews and may be terminated at any time by a one-month prior written notice.
On March 7, 2023, our U.S.
subsidiary Kamada Plasma LLC entered into a lease agreement for a 12,000 square foot premises in Houston, Texas
to be used as a plasma
collection center. The lease is in effect for an initial period of ten years commencing on February 16, 2024. We have the option to
extend
the lease for two consecutive periods of five years each, upon six months prior written notice. During 2024, we completed the construction
of the
new plasma collection center in this facility and commenced plasma collection activities after obtaining the required site registration.
In addition, on May 2, 2024,
our U.S. subsidiary Kamada Plasma LLC entered into a lease agreement for a 11,100 square foot premises in San
Antonio, Texas for our third
plasma collection center. The lease is in effect for an initial period of ten years. We have the option to extend the lease for three
additional periods of five years each, upon four months prior written notice. During 2024, we began construction of the new plasma collection
center in this
facility and, we expect to open the new plasma collection center in this facility during the first quarter of 2025, after
obtaining the required site registration.
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating and Financial Review and Prospects
The following discussion
of our financial condition and results of operations should be read in conjunction with our consolidated financial
statements and the
related notes to those statements included elsewhere in this Annual Report. In addition to historical consolidated financial information,
the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual
results and timing
of selected events may differ materially from those anticipated in these forward-looking statements as a result of
many factors, including those discussed
under “Item 3. Key Information—D. Risk Factors” and elsewhere in this Annual
Report.
The audited consolidated
financial statements for the years ended December 31, 2024, 2023 and 2022 in this Annual Report have been prepared in
accordance with
IFRS as issued by the IASB.
Overview
We are a global biopharmaceutical
company with a portfolio of marketed products indicated for rare and serious conditions and a leader in the
specialty plasma-derived therapies
field. Our strategy is focused on driving profitable growth through four primary growth pillars:
First, organic growth from
our commercial activities, including continued investment in the commercialization and life cycle management of our
Proprietary Products,
which include six FDA-approved specialty plasma-derived products: KEDRAB®, CYTOGAM®, GLASSIA®, WINRHO SDF®,
VARIZIG®
and HEPAGAM B®, as well as KAMRAB®, KAMRHO (D)® and two types of equine-based anti-snake venom (“ASV”) products,
and the
products in our distribution segment portfolio, mainly through the launch of several biosimilar products in Israel.
Second, we aim to secure significant
new business development, in-licensing and/or M&A opportunities in 2025, which we anticipate will
enhance our marketed products portfolio
and leverage our financial strength and existing commercial infrastructure to drive long-term growth.
Third, we are expanding our
plasma collection operations to support revenue growth through the sale of normal source plasma to other plasma-
derived manufacturers,
and to support our increasing demand for hyper-immune plasma. We currently have two operating plasma collection centers in the
United
States, in Beaumont Texas and Houston Texas, and plan to open our third center in San Antonio, Texas, by the end of the first quarter
of 2025.
Lastly, we are leveraging
our manufacturing, research and development expertise to advance the development and commercialization of additional
product candidates,
targeting areas of significant unmet medical need, with our lead product candidate Inhaled AAT, for which we are continuing to
progress
the InnovAATe clinical trial, a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial.
73
Our Commercial Activities
Our commercial activities
operate in two segments: the Proprietary Products segment and the Distribution segment.
Proprietary Products
Segment. The Proprietary Products segment includes our six FDA approved plasma-derived biopharmaceutical products:
KEDRAB, CYTOGAM,
GLASSIA, WINRHO SDF, HEPAGAM B and VARIZIG, as well as KAMRAB, KAMRHO (D) and two types of equine-based
ASV products. We distribute these
products directly and through strategic partners or third-party distributors in over 30 countries. We manufacture our
proprietary products
at our cGMP production facility, which is registered with the FDA in Beit Kama, Israel, using our proprietary platform technology and
know-how for the extraction and purification of proteins and IgGs from human plasma, as well as at third party contract manufacturing
facilities. In
addition, our Proprietary Products segment includes our plasma collection operations, where we collect Anti-Rabies and
Anti-D hyper-immune plasma for
the manufacture of some of our products (WINRHO SDF, KAMRHO (D), KAMRAB and KEDRAB) as well as normal source
plasma for sale to third
parties. For information regarding our proprietary products, see “Item 4. Information on the Company—Business
Overview—Our Business—Commercial
Activities.”
Our Proprietary Products segment
sales totaled $141.4 million, $115.5 million and $102.6 million for the years ended December 31, 2024, 2023
and 2022, respectively. Most
revenues from the Proprietary Products segment are generated from sales in the United States, accounting for 71%, 64% and
64% of the segment’s
revenues for the years ended December 31, 2024, 2023 and 2022, respectively.
Distribution Segment
In the Distribution segment,
we leverage our expertise and presence in the Israeli biopharmaceutical market to distribute in Israel more than 25
pharmaceutical products,
exclusively licensed from international manufacturers. Sales generated by our Distribution segment during 2024 totaled $19.5
million,
as compared to $27.1 million and $26.7 million during 2023 and 2022, respectively. The decrease in revenues during 2024 is primarily the
result of
reduction in our sales of IVIG, sold in Israel as part of annual tenders of local HMOs and hospitals, due to a significant reduction
in market prices for this
product category and increased competition. Our gross profitability in the Distribution segment decreased during
2024, also affected by the reduction in
IVIG sales, write-downs of remaining short dated IVIG inventory, and increased importation-related
logistics costs due to limitations in air travel to Israel
during 2024. As part of our Distribution segment, we have licensed a portfolio
of biosimilar products from multiple international companies for distribution
in Israel. We launched the first product of this portfolio
in Israel during the first quarter of 2024, generating $1.5 million in sales during 2024. Subject to
EMA and subsequently IMOH approvals,
two additional biosimilar products are expected to be launched during 2025 and the remaining biosimilar
products are expected to be launched
in Israel over the coming years, at a rate of 1-3 products per year, while continuing to explore opportunities to in-
license additional
biosimilar products and expand the portfolio. We believe that sales generated by the launch of the biosimilar products will serve as a
major growth and profitability catalyst for our Distribution segment. We estimate that revenues from the sales of our existing biosimilar
products portfolio
in Israel will increase to between approximately $15 million to $20 million within the next five years and will continue
to grow thereafter, subject to the
continued launch of the entire portfolio as scheduled.
Strategic Transactions
We are actively seeking new
business development, in-licensing and/or M&A opportunities in 2025. These anticipated transactions aim to
leverage our financial
strength, enhance our marketed products portfolio and leverage synergies with our existing commercial operations. We are targeting
the
acquisition or in-licensing of commercial products for distribution by us in markets we currently operate, particularly the U.S. market.
These products
may be plasma derived, allowing us to utilize manufacturing synergies, or non-plasma derived, leveraging our commercial,
marketing and distribution
capabilities to diversify our offerings and address a broader range of specialty, rare and serious conditions.
We may also explore manufacturing services
agreements to manufacture plasma-derived products for other companies, which can provide additional
revenue streams and leverage our expertise in
plasma-derived biopharmaceuticals.
Inhaled AAT Phase 3 Pivotal Study
In addition to our commercial
operation, we invest in research and development of new product candidates, targeting significant unmet medical
needs. Our leading investigational
product is Inhaled AAT for AATD, for which we are continuing to progress the InnovAATe clinical trial, a randomized,
double-blind, placebo-controlled,
pivotal Phase 3 trial. In January 2025, we announced that the FDA confirmed its agreement with our proposal to change
the two-sided Type
1 error rate control from 5% to 10% (p-value of 0.1) for the pivotal Phase 3 InnovAATe clinical trial. Based on this change in the p-
value,
as well as additional expected revisions to the study’s SAP, we plan to reduce the study sample size from 220 patients to approximately
180 patients,
while maintaining the trial’s statistical power. We plan to submit the revised SAP to the FDA and to conduct an interim
futility analysis for the InnovAATe
clinical study by the end of 2025. In addition, we are also seeking collaborations with potential
partners to bring this product to market. We have additional
product candidates in the early development stage. For additional information
regarding our research and development activities, see “Item 4. Information
on the Company— Information on the Company—Business
Overview—Our Development Product Pipeline”.
74
2025 Financial Guidance
We currently expect to generate
total revenues for the fiscal year 2025 in the range of $178 million to $182 million and adjusted EBITDA in the
range of $38 million to
$42 million. The midpoint of the projected 2025 revenue and adjusted EBITDA forecast represents a year-over-year increase of
12% in revenues
and 17% in adjusted EBITDA. For details regarding the use of non-IFRS measures, see “Item 5. Operating and Financial Review and
Prospectus—Non-IFRS Financial Measures.”
Non-IFRS Financial Measures
We present EBITDA and adjusted
EBITDA because we use these non-IFRS financial measures to assess our operational performance, for
financial and operational decision-making,
and as a means to evaluate period-to-period comparisons on a consistent basis. Management believes these non-
IFRS financial measures are
useful to investors because: (1) they allow for greater transparency with respect to key metrics used by management in its
financial and
operational decision-making and provide investors with a meaningful perspective on the current underlying performance of the Company’s
core ongoing operations; and (2) they exclude the impact of certain items that are not directly attributable to our core operating performance
and that may
obscure trends in the core operating performance of the business. Non-IFRS financial measures have limitations as an analytical
tool and should not be
considered in isolation from, or as a substitute for, our IFRS results. We expect to continue reporting non-IFRS
financial measures, adjusting for the items
described below, and we expect to continue to incur expenses similar to certain of the non-cash,
non-IFRS adjustments described below. Accordingly,
unless otherwise stated, the exclusion of these and other similar items in the presentation
of non-IFRS financial measures should not be construed as an
inference that these items are unusual, infrequent or non-recurring. EBITDA
and adjusted EBITDA are not recognized terms under IFRS and do not
purport to be an alternative to IFRS terms as an indicator of operating
performance or any other IFRS measure. Moreover, because not all companies use
identical measures and calculations, the presentation of
EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures of other
companies. EBITDA and adjusted EBITDA are
defined as net income (loss), plus income tax expense, plus or minus financial income or expenses, net,
plus depreciation and amortization
expense, plus non-cash share-based compensation expenses and certain other costs.
For the projected 2025 adjusted
EBITDA, the company is unable to provide a reconciliation of this forward measure to the most comparable IFRS
financial measure because
the information for these measures is dependent on future events, many of which are outside of our control. Additionally,
estimating such
forward-looking measures and providing a meaningful reconciliation consistent with our accounting policies for future periods is
meaningfully
difficult and requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable
effort.
Forward-looking non-IFRS measures are estimated in a manner consistent with the relevant definitions and assumptions noted in
the company’s non-IFRS
measures for historical periods.
Key Components of Our Results of Operations
Business Combination
In November 2021, we acquired
a portfolio of the following four FDA approved plasma-derived hyperimmune commercial products from Saol:
CYTOGAM, HEPAGAM B, VARIZIG and
WINRHO SDF. Under the terms of the agreement, we paid Saol a $95.0 million upfront payment, and agreed
to pay up to an additional $50.0
million of contingent consideration subject to the achievement of sales thresholds for the period commencing on the
acquisition date and
ending on December 31, 2034. The first and second sales thresholds were achieved by the end of 2022 and 2023, respectively and were
subsequently
paid. The third sales threshold is expected to be achieved during the first quarter of 2025. Subject to certain conditions defined in
the
agreement between the parties, we may be entitled to up to a $3.0 million credit, which is deductible from the contingent consideration
payments due for
the years 2023 through 2027. The entitlement for such credit was not met though the end of 2024.
In addition to accounting
for the contingent consideration described above, we assumed certain of Saol’s
liabilities for the future payment of
royalties (some of which are perpetual) and milestone payments to third parties, subject to the
achievement of corresponding CYTOGAM related net sales
thresholds and milestones. The fair value of such assumed liabilities at the acquisition
date was estimated at $47.2 million. Such assumed liabilities include:
●
Royalties: 10% of the annual global net sales of CYTOGAM up to $25.0 million and 5% of net sales that are greater than $25.0 million, in
perpetuity; 2% of the annual global net sales of CYTOGAM in perpetuity; and 8% of the annual global net sales of CYTOGAM for period of
six years commencing in October 2023, subject to a maximum aggregate of $5.0 million per year and a maximum aggregate amount of $30.0
million throughout the entire six year period.
●
Sales milestones: Two sales milestones of $1.5 million each in the
event that the annual net sales of CYTOGAM in the U.S. market exceeds
certain thresholds. The first milestone was met, and the
milestone payment was made in 2023; the second milestone was not met and
therefore, the milestone payment was not required to be
paid.
●
Milestone: $8.5 million upon the receipt of FDA approval for the
manufacturing of CYTOGAM at the Company’s manufacturing facility in
Israel. The milestone was met, and the milestone payment
was made in 2023.
During each of the years
ended December 31, 2024, and 2023, we accounted for revaluation of such contingent consideration and assumed
liabilities in an amount
of $8.1 million and $1.0 million, respectively, and such costs were recorded as part of the financial expenses, net.
75
The acquisition was categorized
as a business combination and accounted for by applying the acquisition method, pursuant to which we identified
and valued the acquired
assets and assumed liabilities. The excess amount of the acquisition cost over the net value of the acquired assets and assumed
liabilities
is recorded as goodwill. The fair value the intangible assets acquired as of the acquisition date totaled $121.1 million. Intangible assets
with a
finite useful life are amortized on a straight-line basis over their useful life (estimated 6-20 years). For each of the years
in the years ended December 31,
2024, and 2023, we accounted for $7.1 million of amortization expenses associated with such intangible
assets. Intangible assets and goodwill are reviewed
for impairment whenever there is an indication that the asset may be impaired.
Revenues
In our Proprietary
Products segment, we generate revenues from the sale of products to wholesalers in the U.S. market, strategic partners
(specifically
KEDRAB to Kedrion), local distributors in ex-U.S. markets, HMOs and local hospitals. Revenues from our Proprietary Products
segments
also include royalty income from our strategic partner, Takeda, on account of their sales of GLASSIA, as well as income
from the sales of plasma collected
and sold to third parties. In our Distribution segment, we generate revenues from the sale in
Israel of imported products produced by third parties. Revenues
are presented net of any discounts, chargebacks, fees, dues and/or
marketing contribution payments extended to our partners, distributors or end users of
our products.
The following table sets forth
the geographic breakdown of our total revenues for the periods indicated:
Year Ended
December 31,
2024
2023
United States
62%
52%
Israel
16%
22%
Latin America
12%
9%
Canada
6%
8%
Europe
3%
5%
Rest of World
1%
4%
100%
100%
Cost of Revenues
Cost of revenues in our Proprietary
Products segment includes expenses related to the manufacturing of products such as raw materials (including
plasma), payroll (including
bonus, equity-based compensation, and other benefits), utilities, laboratory costs and depreciation. In addition, part of the cost
of
revenues derived from payment on account of manufacturing services provided by third parties. Cost of revenues also includes provisions
for the costs
associated with manufacturing scraps and inventory write-offs.
Cost of revenues includes
amortization expenses related to intangible assets recognized pursuant to the acquisition of CYTOGAM, HEPGAM B,
VARIZIG and WINRHO SDF.
Intangible assets which amortization is accounted for in the costs of revenues include the acquired products intellectual
property and
an assumed contract manufacturing agreement.
A significant portion of our
manufacturing costs are for raw materials consisting of plasma or plasma fraction. To ensure the availability of plasma
and plasma fraction,
we secured supply agreements with multiple suppliers, including Kedrion for the manufacturing of KEDRAB and KAMRAB, CSL
Behring for the
manufacturing of CYTOGAM and Takeda for the manufacturing of GLASSIA. In addition, we are leveraging our plasma collection
experience
to expand our plasma collection capacity in the United States to support our continued plasma needs and reduce our dependency on third
party
plasma suppliers. In 2024, we opened our second plasma collection center, in Houston, Texas, which is expected to be one of the
largest sites for specialty
plasma collection in the United States, and we plan to open our third center in San Antonio, Texas by the
end of the first quarter of 2025.
Costs of revenues in our Distribution
segment consists of costs of products acquired, packaging and labeling for sales by us in Israel.
Gross Profit
Gross profit is the difference
between total revenues and the cost of revenues. Overall gross profit is mainly affected by volume and mix of sales,
as well as manufacturing
efficiencies, cost of raw materials and plant maintenance and overhead costs.
Our gross margins in our Proprietary
Products segment, which were 48% and 45% for the years ended December 31, 2024, and 2023, respectively,
are generally higher than in our
Distribution segment, which were 11% and 12% for the years ended December 31, 2024, and 2023, respectively.
76
The increase in gross profitability
in our Proprietary Products segment during the year ended December 31, 2024, was primarily as a result of a
positive product sales mix,
led by increased sales of KEDRAB and CYOTGAM in the U.S. market. The increase in gross profitability in our Proprietary
Products segment
during the year ended December 31, 2023, was mainly due to the significant increase in sales of KEDRAB to Kedrion which
significantly
improved our product sales mix in this segment.
Research and Development Expenses
The development of pharmaceutical
products, including plasma-derived protein therapeutics, is characterized by significant up-front product
development costs. Research
and development expenses are incurred for the development of new products and newly revised processes for existing
products and includes
expenses for pre-clinical and clinical trials, development activities in the different fields, the advanced understanding of the
mechanism
of action of our products, improving existing products and processes, development work at the request of regulatory authorities and strategic
partners, as well as communication with regulatory authorities related to our commercial products and clinical programs. In addition,
such expenses include
development materials, payroll for research and development personnel (including payroll, bonus, equity-based compensation
and other benefits), including
scientists and professionals for product registration and approval, external advisors, and the allotted
cost of our manufacturing facility for research and
development purposes. While research and development expenses are unallocated on a
segment basis, the activities generally relate to our existing or in-
development proprietary products.
Product development costs
may fluctuate from period to period, as our product candidates proceed through various stages of development. We
expect to continue to
incur research and development expenses related to clinical trials, as well as other ongoing, planned, or future clinical trials with
regard to our product pipeline. See “Item 4. Information on the Company Information on the Company—Business Overview—Our
Development Product
Pipeline.”
Selling and Marketing Expenses
Selling and marketing expenses
principally consist of compensation for employees and executives in sales and marketing related positions
(including payroll, bonuses,
equity-based compensation and other benefits), expenditures incurred for sales incentive, advertising, marketing or
promotional activities,
shipping and handling costs, 3PL services fees, product liability insurance and business development activities, as well as marketing
authorization fees to regulatory agencies, including the FDA and similar regulatory bodies in other markets in which we operate.
Selling and marketing expenses
include amortization expenses related to intangible assets recognized pursuant to the acquisition of CYTOGAM,
HEPGAM B, VARIZIG and WINRHO
SDF. Such intangible assets include customer relations.
General and Administrative Expenses
General and administrative
expenses consist of compensation for employees in executive and administrative functions (including payroll, bonuses,
equity compensation
and other benefits), office expenses, professional consulting services, public company related costs, directors’ and officer’s
liability
insurance and other insurance costs, legal, audit fees, other professional services as well as employee welfare costs.
Financial Income
Financial income is comprised
of interest income on amounts invested in bank deposits.
Income (expense) in respect of currency exchange differences
and derivatives instruments, net
Income (expense) in respect
of currency exchange differences and derivatives instruments, net is comprised of changes in balances denominated in
currencies other
than our functional currency. Changes in the fair value of derivatives instruments not designated as hedging instruments are reported
to
profit or loss.
Financial income (expense) in respect of contingent consideration
and other long- term liabilities
Financial income (expense)
in respect of contingent consideration and other long-term liabilities is comprised of the revaluation of the outstanding
balances of
the contingent consideration and other long-term liabilities associated with expected future payments related to the acquisition of CYTOGAM,
HEPGAM B, VARIZIG and WINRHO SDF (for details, see above under “Key Components of Our Results of Operations—Business Combination”).
Financial Expenses
Financial expenses are comprised
of bank charges, changes in the time value of provisions, the portion of changes in the fair value of financial
assets or liabilities
at fair value through other comprehensive income and interest and amortization of bank loans and leases.
77
Taxes on Income
Taxes on income in profit
or loss comprise of current taxes, deferred taxes and taxes in respect of prior years. In addition, we evaluate potential
uncertain tax
positions, including additional tax and interest expenses, and recognize a provision when it is more probable than not that we will have
to use
our economic resources to pay such obligation.
Deferred tax assets are reviewed
at the end of each reporting period and reduced to the extent that it is no longer probable that they will be utilized.
Deductible carryforward
losses and temporary differences for which deferred tax assets have not been recognized are reviewed at the end of each reporting
period,
and a respective deferred tax asset is recognized to the extent that their utilization is probable.
We operate in multiple tax
jurisdictions and account for taxes on income per each jurisdiction. As of December 31, 2024, we have NOLs for Israeli
tax purposes of
approximately $13.4 million. These NOLs have no expiration date. Following the full utilization of these NOLs, we expect that our
effective
income tax rate in Israel will reflect the tax benefits discussed below.
We have applied for a tax
ruling from the ITA according to which, if approved, among other things, our activity would be qualified as an
“industrial activity,”
as defined in Investment Law, and we may be eligible for tax benefits according to the Investment Law, and our income from sales of
our
Proprietary Products (including royalties-based income) would be deemed “Preferred Income” of “Preferred Technology
Income” (in each case, within
the meaning of the Investment Law), to the extent we meet the requirements of being a Preferred Technology
Enterprise. There can be no assurance that we
will comply with the conditions required to remain eligible for benefits under the Investment
Law in the future, including under the tax ruling (if obtained),
or that we will be entitled to any additional benefits thereunder. As
of the date of this Annual Report, we have not utilized any tax benefits under the
Investment Law. See “Item 10. Additional
Information — E. Taxation — Israeli Tax Considerations and Government Programs.”
We may be subject to withholding
taxes for payments we receive from foreign countries. If certain conditions are met, these taxes may be credited
against future tax liabilities
pursuant to tax treaties and Israeli tax laws.
Since 2021, we conduct commercial
operations in the United States through our subsidiaries Kamada Inc. and Kamada Plasma LLC. The two
entities are subject to U.S. federal
and certain state income taxes and file a combined tax return. Income tax expenses due in connection with such activities
are included
as part of taxes on income in our consolidated statement of operations. As of December 31, 2024, the two entities had NOLs and other
temporary
differences for U.S. tax purposes of approximately $0.4 million.
As we further expand our commercial
operations into other countries, we could become subject to taxation based on such a country’s statutory
rates and our effective
tax rate could fluctuate accordingly.
A. Operating
Results
For a discussion of our results
of operations for the year ended December 31, 2022, including a year-to-year comparison between 2023 and 2022,
and a discussion of our
liquidity and capital resources for the year ended December 31, 2022, see “Item 5. Operating and Financial Review and Prospects”
in our Annual Report on Form 20-F for the year ended December 31, 2023.
The following table sets forth
certain statements of operations data:
Year Ended
December 31,
2024
2023
Revenues from Proprietary Products segment
$
141,447 $
115,458
Revenues from Distribution segment
19,506
27,061
Total revenues
160,953
142,519
Cost of revenues from Proprietary Products segment
73,708
63,342
Cost of revenues from Distribution segment
17,278
23,687
Total cost of revenues
90,986
87,029
Gross profit
69,967
55,490
Research and development expenses
15,185
13,933
Selling and marketing expenses
18,428
16,193
General and administrative expenses
15,702
14,381
Other expense
601
919
Operating income (loss)
20,051
10,064
Financial income
2,118
588
Income (expense) in respect of currency exchange differences and derivatives instruments, net
(94)
55
Financial income (expense) in respect of contingent consideration and other long- term liabilities
(8,081)
(980)
Financial expenses
(660)
(1,298)
Income (loss) before taxes on income
13,334
8,429
Taxes on income
(1,128)
145
Net income (loss)
$
14,462 $
8,284
78
Year Ended December 31, 2024 Compared to
Year Ended December 31, 2023
Segment Results
Change 2024 vs. 2023
2024
2023
Amount
Percent
(U.S. Dollars in thousands)
Revenues:
Proprietary Products
$
141,447 $
115,458 $
25,989
23%
Distribution
19,506
27,061
(7,555)
(28)%
Total
160,953
142,519
18,434
13%
Cost of Revenues:
Proprietary Products
73,708
63,342
10,366
16%
Distribution
17,278
23,687
(6,409)
(27)%
Total
90,986
87,029
3,957
5%
Gross Profit:
Proprietary Products
$
67,739 $
52,116 $
15,623
30%
Distribution
2,228
3,374
(1,146)
(34)%
Total
$
69,967 $
55,490 $
14,447
26%
Revenues
For the year ended December
31, 2024, we generated $161.0 million of total revenues, as compared to $142.5 million for the year ended
December 31, 2023, an increase
of $18.4 million, or approximately 12.9%, primarily due to an increase in revenues in the Proprietary Products segment.
Sales generated by our Proprietary
Products segment totaled $141.4 million for the year ended December 31, 2024, a $26.0 million increase
compared to the $115.5 million
for the year ended December 31, 2023. The increase in revenues in the Proprietary Products segment in 2024 was primarily
attributable
to increased sales of KEDRAB due to increased demand for this product in the U.S. market and increased CYTOGAM sales reflecting a return
to the 2022 sales levels of this product. KEDRAB sales to Kedrion for the year ended December 31, 2024, totaled $50.0 million, a $17.2
million increase
compared to the year ended December 31, 2023. CYTOGAM sales for the year ended December 31, 2024, totaled $22.5 million,
a $5.3 million increase
compared to the year ended December 31, 2023. In addition, for the year ended December 31, 2024, we accounted
for $16.9 of sales-based royalty income
from Takeda, as compared to $16.1 million for the year ended December 31, 2023, an increase of
$0.8 million. Sales of all other products in the Proprietary
Products segment for the year ended December 31, 2024, totaled $52.0 million,
as compared to $49.4 million for the year ended December 31, 2023, a $2.6
million increase compared to the year ended December 31, 2023.
Sales generated by our Distribution
segment during the year ended December 31, 2024, totaled $19.5 million, as compared to $27.1 million during
the year ended December 31,
2023. The decrease in revenues during 2024 is primarily the result of reduction in our sales of IVIG, sold in Israel as part of
annual
tenders of local HMOs and hospitals, due to a significant reduction in market prices for this product category and increased competition.
Cost of Revenues
For the year ended December
31, 2024, we incurred $91.0 million of cost of revenues, as compared to $87.0 million for the year ended December
31, 2024, an increase
of $4.0 million, or approximately 5%. The increase in costs of revenues is mainly attributable to increased sales. Cost of revenues for
each of the years ended December 31, 2024, and 2023, included an intangible assets amortization cost of $5.4 million.
Gross Profit
Gross profit and gross margins
in our Proprietary Products segment for the year ended December 31, 2024, were $67.7 and 47.9%, respectively, as
compared to $52.1 and
45.1% for the year ended December 31, 2023, respectively, representing an increase of $15.6 million and 30.0%, respectively. Such
increase
is primarily attributed to an improved product sales mix associated with the increase in KEDRAB sales due to increased demand for the
product in
the U.S. market, as well as increased sales of CYTOGAM, mainly in the U.S. market.
Gross profit and gross margins
in our Distribution segment for the year ended December 31, 2024, were $2.2 and 11.4%, respectively, as
compared to $3.4 and 12.5% for
the year ended December 31, 2023, respectively, representing a decrease of $1.2 million and 34.0%, respectively. Such
decrease is primarily
attributed to the reduction of IVIG sales, write-downs of remaining short dated IVIG inventory and increased importation-related
logistics
costs due to limitations in air travel to Israel during 2024.
Research and Development Expenses
For the year ended December
31, 2024, we incurred $15.2 million of research and development expenses, as compared to $13.9 million for the
year ended December 31,
2023, an increase of $1.3 million, or approximately 9.0%. The increase was primarily due to increased costs associated with
advancing
the ongoing Phase 3 InnovAATe trial for Inhaled AAT as well as our other early-stage developments programs.
79
Selling and Marketing Expenses
For the year ended December
31, 2024, we incurred $18.4 million of selling and marketing expenses, as compared to $16.2 million for the year
ended December 31, 2023,
an increase of $2.2 million, or approximately 13.6%. This increase was primarily due to increased costs associated with
marketing activities
in the United States.
Selling and marketing
expenses for each of the years ended December 31, 2024 and 2023 include $1.7 million of amortization expenses related to
intangible
assets recognized pursuant to a business combination.
Selling and marketing expenses
accounted for approximately 11.4% of total revenues for each of the years ended December 31, 2024 and 2023.
General and Administrative Expenses
For the year ended December
31, 2024, we incurred $15.7 million of general and administrative expenses, as compared to $14.4 million for the
year ended December 31,
2023, an increase of $1.3 million, or approximately 9.0%. This increase was primarily due to increased administrative,
information technology
and professional services costs required for continued support of the increased commercial operation.
General and administrative
expenses accounted for approximately 9.8% and 10.1% of total revenues for the years ended December 31, 2024, and
2023, respectively.
Other expenses
For the years ended December
31, 2024 and 2023, we incurred $0.6 million and $0.9 million of other expenses. For the year ended December 31,
2024, such expenses included
costs associated with write downs of certain upfront licensing fees associated with products licensed for distribution as part
of our
Distribution segment. For the year ended December 31, 2023, such expenses included costs associated with a planned workforce downsizing
at our
manufacturing plant in Israel, optimizing staff level to our capacity needs, as well as partial recognition of a milestone payment
associated with the
completion of the technology transfer of CYTOGAM manufacturing, which was paid in full as a lump sum during the third
quarter of 2023 to CSL
Behring.
Operating Profit
Operating profit and operating
margin for the year ended December 31, 2024, were $20.1 and 12.5%, respectively, as compared to $10.1 and 7.1%
for the year ended December
31, 2023, respectively, representing an increase of $10.0 million and 100.0%, respectively. Such increase is attributed to the
overall
increase of our sales, improved product sales mix and efficiencies in managing our operational expenses.
Financial Income
For the years ended December
31, 2024, and 2023, we generated $2.1 and $0.6 million of financial income, respectively. Financial income is
primarily comprised of interest
income on bank deposits. The increase in financial income is attributed to the overall increase in our cash balances
throughout the year
ended December 31, 2024.
Income (expense) in respect of currency exchange
differences and derivatives instruments, net
For the year ended
December 31, 2024, we incurred $0.1 million of expenses in respect of currency exchange differences on balances in other
currencies,
compared to $0.1 million of income in respect of currency exchange differences on balances in other currencies for the year ended
December
31, 2023. Income and expenses with respect to currency exchange differences primarily relate to assets and liabilities
nominated in NIS and Euro, which
are translated into the U.S. dollar, as well as the impact of derivatives.
Financial expenses in respect of contingent
consideration and other long- term liabilities
For the years ended December
31, 2024, and 2023, we incurred $8.1 million and $1.0 million of financial expenses in respect of contingent
consideration and other long-term
liabilities, respectively. These expenses are in respect of reevaluation of contingent consideration and other long- term
liabilities
associated with the acquisition of CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF (for details regarding the description of such
contingent
consideration and other long-terms liabilities, see above under “Key Components of Our Results of Operations—Business Combination”
and for
details regarding the payments made on account of these liabilities see below under “Liquidity and Capital Resources”).
The increase in reevaluation costs
is attributed to an improved forecast of meeting the future payments associated with the acquisition.
Financial Expenses
For the years ended December
31, 2024, and 2023, we incurred $0.7 million and $1.3 million of financial expenses, respectively. Financial
expenses for the year ended
December 31, 2024, were primarily related to outstanding lease obligations. Financial expenses for the year ended December
31, 2023, were
primarily related to interest costs on a debt facility obtained to partially fund the acquisition of CYTOGAM, HEPGAM B, VARIZIG and
WINRHO
SDF, as well as outstanding lease obligations. The debt facility was repaid in full during the third quarter of 2023. See below “Liquidity
and
Capital Resources.”
80
Taxes on Income
For the year ended December
31, 2024, we recorded $1.1 million of tax income due to accounting for a deferred tax asset on NOLs and other
temporary differences that
we anticipate utilizing in the foreseeable future. For the year ended December 31, 2023, we recorded a $0.2 million tax expense
primarily
related to our U.S. operations.
B. Liquidity and Capital
Resources
Our primary uses of cash are
to fund working capital requirements, research and development expenses and capital expenditures, as well as for
acquisitions of new products,
product candidates and assets. Historically, we have funded our operations primarily through cash flow from operations
(including sales
of our Proprietary Products and distribution products), payments received in connection with strategic partnerships (including milestone
payments from collaboration agreements), issuances of ordinary shares (including our 2005 initial public offering and listing on the TASE,
our 2013 initial
public offering in the United States and listing on Nasdaq, our 2017 underwritten public offering and our 2020 and 2023
private placements), and the
issuance of convertible debentures and warrants to purchase our ordinary shares as well as through commercial
debt financing for the funding of certain
acquisitions.
In September 2023, we consummated
a $60 million private placement of approximately 12.6 million ordinary shares to FIMI Opportunity Funds
at a price of $4.75 per share,
following which its holdings increased to approximately 38.4% of our outstanding ordinary shares and FIMI Opportunity
Funds became our
controlling shareholder, within the meaning of the Israeli Companies Law, 5759-1999 (the “Israeli Companies Law”). We used
a portion
of the proceeds from the private placement to repay the credit facility and loan we secured in connection with the acquisition
of CYTOGAM, HEPGAM B,
VARIZIG and WINRHO SDF from Saol in November 2021 (see below “Credit Facility and Loan Agreement with Bank
Hapoalim B.M.”
The balance of cash and cash
equivalents as of December 31, 2024, and 2023, totaled $78.4 million and $55.6 million, respectively. We plan to
fund our future operations
and strategic initiatives (See “Item 4. Information on the Company”) through our financial resources, cash generated through
our
operational activities, which generated $47.6 million and $4.3 million during the years ended December 31, 2024, and 2023, respectively,
commercialization and or out-licensing of our pipeline product candidates, and to the extent required, raising additional capital through
the issuance of
equity or debt.
Our capital expenditures for
the years ended December 31, 2024, and 2023 were $10.7 million and $5.8 million, respectively. Our capital
expenditure relates primarily
to the construction of our plasma collection facilities in Houston, Texas and San-Antonio, Texas, as well as the upgrades and
improvements
of our facilities and manufacturing and plasma collection equipment. We expect our capital expenditures to increase in the coming years
mainly to facilitate the transition of manufacturing of HEPGAM B, VARIZIG and WINRHO SDF to our manufacturing facility in Beit Kama, Israel,
which
will require possible upgrades to plant infrastructure as well as to upgrade manufacturing automation. To date, we have not made
any material
commitments towards such planned expenditures.
In addition to our capital
expenditure, in November 2021, we acquired CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF from Saol.
Under the terms of the agreement, we paid
Saol a $95.0 million upfront payment, and agreed to pay up to an additional $50.0 million of contingent
consideration subject the achievement
of sales thresholds for the period commencing on the acquisition date and ending on December 31, 2034. During
2023, we made the first
payment of the contingent consideration in the amount of $3.0 million following achievement of the first sales threshold. The
second sales
threshold was met, and the second $3.0 million milestone payment was paid during February 2024. The third sales threshold is expected
to be
achieved during the first quarter of 2025. Subject to certain conditions defined in the agreement between the parties, we may be
entitled to up to a $3.0
million credit, which is deductible from the contingent consideration payments due for the years 2023 through
2027. The entitlement for such credit was
not met though the end of 2024. In addition, we acquired inventory in the amount of $14.2 million
and agreed to pay the consideration to Saol in ten
quarterly installments of $1.5 million each or the remaining balance at the final installment.
Through the first half of 2024, we completed all payments due
on account of such inventory commitment. We also assumed certain of Saol’s
liabilities for the future payment of royalties (some of which are perpetual)
and milestone payments to third parties subject to the achievement
of corresponding CYTOGAM related net sales thresholds and milestones. During the
years ended December 31, 2024, and 2023, we paid approximately
$12.7 million and $17.3 million, respectively, on account of such contingent
consideration, inventory related liability and the assumed
liabilities, and the outstanding balance of the contingent consideration and the assumed liabilities
as of December 31, 2024, totaled
$63.6 million. During the next 12 months we anticipate paying approximately $10.4 million on account of such
contingent consideration
and the assumed liabilities, which payments are expected to be funded by our existing financial resources and cash to be generated
through
our operational activities. Payments on account of such liabilities expected to be made beyond the next 12 months are expected to be funded
from
expected cash to be generated by our operating activities, and to the extent required, raising additional capital through the issuance
of equity or debt. For
additional information also see above under “Key Components of Our Results of Operations—Business
Combination” and Note 13a to our consolidated
financial statements included in this Annual Report.
We have entered into long-term
lease agreements with respect to office facilities, storage spaces, plasma collection centers, vehicles and certain
office equipment.
The terms of such lease arrangements are between 3 to 20 years. The outstanding lease obligation as of December 31, 2024, totaled $11.1
million. For additional information see Note 14 to our consolidated financial statements included in this Annual Report.
81
We are also obligated to make
certain severance or pension payments to our Israeli employees upon their retirement in accordance with Israeli law.
For additional information,
see “Post-Employment Benefits Liabilities” and Note 2k and Note 16 to our consolidated financial statements included in this
Annual Report.
We believe our current cash
and cash equivalents, along with the expected future cash to be generated by our operational activities, will be
sufficient to satisfy
our liquidity requirements for at least the next 12 months.
Credit Facility and Loan Agreement with Bank Hapoalim B.M.
In connection with the acquisition
of CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF from Saol, on November 15, 2021, we secured a
$40 million debt facility from Bank Hapoalim
B.M., which was comprised of a $20 million five-year loan and a $20 million short-term revolving credit
facility. The long-term loan bore
interest at a rate of SOFR + 2.18% and was repayable in 54 equal monthly installments commencing on June 16, 2022. In
September 2023,
we repaid in full the outstanding balance of the $20 million five-year loan.
The credit facility was in
effect for an initial period of 12 months. Thereafter, on January 1, 2023, the credit facility was reduced to NIS 35 million
(equivalent
to approximately $10 million) and extended for an additional period of 12 months and subsequently on January 1, 2024, it was extended
for an
additional period of 12 months. Borrowings under the credit facility accrued interest at a rate of PRIME + 0.55 and were repayable
no later than 12 months
from the date advanced. We were required to pay Bank Hapoalim an annual fee of 0.275% for the credit allocation.
The terms of the credit facility included
certain financial covenants, including that we maintain: (i) minimum equity capital of 30% of
the balance sheet and no less than $120 million, examined on
a quarterly basis, (ii) a maximum working capital to debt ratio of 0.8, examined
on a quarterly basis, and (iii) a minimum debt coverage ratio of 1.1 during
2022-2024 and 1.25 in 2025 and onwards, examined on an annual
basis. In addition, the terms of the credit facility contained certain restrictive covenants
including, among others, limitations on restructuring,
the sale of purchase of assets, material licenses, certain changes of control and the creation of floating
charges over our property and
assets. In addition, we undertook not to create any first ranking floating charge over all or materially all of our property and
assets
in favor of any third party unless certain conditions, as defined in the loan agreement, have been satisfied.
On February 17, 2025, we converted
the credit facility to a NIS 35 million on-call credit facility from Bank Hapoalim, with each loan thereunder
bearing interest at a rate
of 6.3%. As part of the conversion, we also undertook not to create a floating charge over all or materially all of our assets. In
addition,
the previous credit facility, as described above, has been terminated, together with our obligations to meet the financial covenants.
Cash Flows from Operating Activities
Net cash provided by operating
activities was $47.6 million for the year ended December 31, 2024. This net cash provided by operating activities
was primarily generated
through our commercial operations, including the sales of our commercial products, mainly KEDRAB and CYTOGAM, as well as
cash generated
from royalties payable by Takeda on account of their GLASSIA sales, net of our operational costs. In addition, the net cash provided by
activities activity was also attributable to improved working capital management and utilization.
Net cash provided by operating
activities was $4.3 million for the year ended December 31, 2023. This net cash provided by operating activities
was generated through
the sales of our commercial products, mainly KEDRAB and CYTOGAM, as well as cash generated from royalties payable by
Takeda on account
of their GLASSIA sales, net of our operational costs.
Cash Flows from Investing Activities
Net cash used in investing
activities was $10.7 million for the year ended December 31, 2024, which comprises of capital expenditures primarily
associated with the
construction of our new plasma collection centers in Houston, Texas and San Antonio, Texas, as well as upgrades and improvements of
our
facilities and manufacturing and plasma collection equipment.
Net cash used in investing
activities was $5.8 million for the year ended December 31, 2023, which comprises of capital expenditures primarily
associated with the
maintenance and improvements of our facilities and the construction of new plasma collection center in Houston, Texas.
Cash Flows from Financing Activities
Net cash used in financing
activities was $13.9 million for the year ended December 31, 2024, and included the payment to Saol of $3.0 million
on account of the
contingent consideration for the second sales threshold and a total of $9.7 million on account of assumed liabilities generated by the
November 2021 acquisition of a portfolio of the four FDA approved plasma-derived hyperimmune commercial products from Saol, which was
comprised
of $2.2 million on account of the remaining acquired deferred inventory liability, as well as $7.5 million on account of the
assumed liabilities associated
with payments of royalties to third parties with respect to CYTOGAM net sales.
Net cash provided by financing
activities was $22.7 million for the year ended December 31, 2023, mainly due to net proceeds from our
September 2023 private placement
to the FIMI Opportunity Funds of an aggregate 12.6 million ordinary shares at a price of $4.75 per share, for an
aggregate net proceeds
of $58.2 million, which was offset in part by the repayment of the outstanding balance of the five-year loan from Bank Hapoalim
B.M in
the amount of $17.4. In addition, net cash provided by financing activities for the year ended December 31, 2023 includes the payment
to Saol of
$3.0 million on account of the contingent consideration for the first sales threshold and $6.0 million on account of the acquired
inventory liability, as well
as $1.5 million on account of the first sales milestone payment and $6.8 million on account of the $8.5 million
milestone payment due upon the completion
of the technology transfer of CYTOGAM manufacturing to our manufacturing facility in Israel
and obtaining the FDA approval for the manufacturing of
CYTOGAM at our manufacturing facility in Israel (the balance of $1.7 million on
account of the $8.5 million milestone payment was paid and accounted
for as cash flows from operating activities).
82
C. Research
and Development, Patents and Licenses, Etc.
Research and development expenses
accounted for approximately 9.4% and 9.8% of total revenues for the years ended December 31, 2024, and
2023, respectively.
Set forth below are the research
and development expenses associated with our major development programs in the years ended December 31,
2024, and 2023:
Year ended
December 31,
2024
2023
Inhaled AAT
$
6,889 $
6,055
Other early stage development programs
91
191
Unallocated salary
5,621
5,110
Unallocated facility cost allocated to research and development
1,559
1,529
Unallocated other expenses
1,025
1,048
Total research and development expenses
$
15,185 $
13,933
Our current intentions with
respect to our major development programs are described in “Item 4. Information on the Company— Information on
the
Company—Business Overview—Our Development Product Pipeline”. We cannot determine with full certainty the duration
and completion costs of the
current or future clinical trials of our major development programs or if, when, or to what extent we will
generate revenues from the commercialization and
sale of any product candidates. We or our strategic partners may never succeed in achieving
marketing approval for any product candidates. The duration,
costs and timing of clinical trials and our major development programs will
depend on a variety of factors, including the uncertainties of future clinical and
preclinical studies, uncertainties in clinical trial
enrollment rates and significant and changing government regulation and whether our current or future
strategic partners are committed
to and make progress in programs licensed to them, if any. In addition, the probability of success for each product
candidate will depend
on numerous factors, including competition, manufacturing capability and commercial viability. See “Item 3. Key Information —
D.
Risk Factors — Risks Related to Development, Regulatory Approval and Commercialization of Product Candidates.”
We will determine which programs
to pursue and how much to fund each program in response to the scientific, pre-clinical and clinical outcome
and results of each product
candidate, as well as an assessment of each product candidate’s commercial potential. We cannot forecast with any degree of
certainty
which of our product candidates, if any, will be subject to future collaborations or how such arrangements would affect our development
plans or
capital requirements.
D. Trend Information.
Adverse macroeconomic conditions,
including inflation, slower growth, changes to fiscal and monetary policy, higher interest rates, and currency
fluctuations have impacted
companies in Israel and around the world, and as the future market conditions and fiscal and monetary policies remain highly
uncertain,
we cannot predict the impact of a recession recessionary economic environment on the demand for our Proprietary Products and our Distribution
segment products and our ability to sustain our forecasted growth and other business and operational prospects. See also “Item 3.D.
“Risk Factors–General
Risks– Developments in the economy may adversely impact our business.”
E. Critical
Accounting Estimates
This discussion and analysis
of our financial condition and results of operations is based on our financial statements, which have been prepared in
accordance with
IFRS as issued by the IASB. The preparation of these financial statements requires management to make estimates that affect the reported
amounts of our assets, liabilities, revenues and expenses. Material accounting policies employed by us, including the use of estimates,
are presented in the
notes to the consolidated financial statements included elsewhere in this Annual Report. We periodically evaluate
our estimates, which are based on
historical experience and on various other assumptions that management believes to be reasonable under
the circumstances. Critical accounting policies are
those that are most important to the portrayal of our financial condition and results
of operations and require management’s subjective or complex
judgments, resulting in the need for management to make estimates about
the effect of matters that are inherently uncertain. If actual performance should
differ from historical experience or if the underlying
assumptions were to change, our financial condition and results of operations may be materially
impacted. In addition, some accounting
policies require significant judgment to apply complex principles of accounting to certain transactions, such as
acquisitions, in determining
the most appropriate accounting treatment.
A detailed description of our
accounting policies is provided in Note 2 to our consolidated financial statements appearing elsewhere in this Annual
Report. The following
provides an overview of certain accounting policies that we believe are the most critical for understanding and evaluating our
financial
condition and results of operations.
83
Revenue Recognition
Revenues are recognized when the customer obtains control over the
promised goods or services.
On the date of the contract’s
inception, we assess the goods or services promised in the contract with the customer and identify the performance
obligations. Revenues
are recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring
goods
or services to a customer.
We include variable consideration,
such as variable prices, discounts, chargeback, rebates, adjustments to the net market price, volume rebates,
and, under certain conditions, a right to return option, in the transaction price, only when it is highly probable that its inclusion will not result
in a
significant revenue reversal in the future once the uncertainty has been resolved. For contracts that consist of more
than one performance obligation, at
contract inception we allocate the contract transaction price to each performance obligation identified
in the contract on a relative stand-alone selling price
basis.
Following the acquisition
of CYTOGAM, WINRHO SDF, VARIZIG and HEPGAM B during November 2021, we, through our wholly owned
subsidiary Kamada Inc., sell these products
in the U.S. market to wholesalers/distributors for redistribution/sale of these products to other parties, such as
hospitals and pharmacies.
Revenue recognition occurs at a point in time when control of the product is transferred to the wholesalers/distributors, generally
on
delivery of the goods.
Our gross sales are subject
to various deductions, which are primarily composed of rebates and discounts to group purchasing organizations,
government agencies, wholesalers,
health insurance companies and managed healthcare organizations. These deductions represent estimates of the related
obligations, requiring
the use of judgment when estimating the effect of these sales deductions on gross sales for a reporting period. These adjustments are
deducted from gross sales to arrive at net sales. We monitor the obligation for these deductions on at least a quarterly basis and record
adjustments when
rebate trends, rebate programs and contract terms, legislative changes, or other significant events indicate that a change
in the obligation is appropriate. The
Company has elected to apply the practical expedient such that it does not evaluate payment terms less than
one year for the existence of a significant
financing component.
The following summarizes the
nature of the most significant adjustments to revenues generated from the sales of these products in the U.S.
market:
Wholesaler chargebacks:
We have arrangements with certain indirect customers whereby the customer
is able to buy products from wholesalers at reduced prices. A
chargeback represents the difference between the invoice price to the wholesaler
and the indirect customer’s contractual discounted price. Provisions for
estimating chargebacks are calculated based on historical
experience and product demand. The provision for chargebacks is recorded as a deduction of
revenue and of the trade receivables on the
consolidated statements of financial position.
Fees for service:
Consists of wholesaler/distributor
fees associated with the redistribution of the products to hospitals and pharmacies. These fees are outlined in
each wholesaler/distributor
contract. The fees are invoiced on a monthly or quarterly basis by the wholesaler/distributor. The provisions for fees for service
are
recorded in the same period that the corresponding revenues are recognized.
Right to return option:
We offer a
right to return option under certain conditions, primarily when goods are sold with a short expiry date. The revenue recognized reflects
the amount of consideration that we expect to be entitled to, excluding the estimated returns.
We also generate revenue in
the form of royalty payments, due from the grant of a license for the use of our IP, knowhow and patents. Royalty
revenue is recognized
when the underlying sales have occurred.
Business combinations and goodwill
In November 2021, we acquired
a portfolio of four FDA-approved plasma-derived hyperimmune commercial products from Saol. For details, see
“Item 5. Operating and
Financial Review and Prospects—Key Components of Our Results of Operations—Business Combination.” The
acquisition was
accounted for as a business combination, for which a key element of the consideration was contingent.
The contingent consideration
was recognized at fair value on the acquisition date and classified as a financial liability in accordance with IFRS 9.
Contingent consideration
is measured at fair value. The fair value is determined using valuation techniques and method, using future cash flows discounted.
Subsequent
changes in the fair value of the contingent consideration are recognized in profit or loss as finance income or finance expense.
As part of the acquisition,
we also assumed certain of Saol’s liabilities for the future payment of royalties (some of which are perpetual) and
milestone payments
to a third party subject to the achievement of corresponding CYTOGAM related net sales. Such assumed liabilities were accounted for
as
a financial liability on the acquisition date. Subsequently, the financial liability is measured at amortized cost, per IFRS 9. Remeasurement
of the
financial liability is recognized as finance income or expense in the statement of operations. For more information see Note 13a
and Note 2e in our
consolidated financial statements included in this Annual Report.
84
Inventories
Inventories are measured at
the lower of cost and net realizable value. The cost of inventories is comprised of costs required to purchase raw
materials and other
indirect costs required to manufacture the product (including salaries), in addition, such costs may include the costs of purchase and
shipping and handling. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs
of completion and the
estimated selling costs.
We determine a standard manufacturing
capacity for each quarter. To the extent the actual manufacturing capacity in a quarter is lower than the
predetermined standard, then
a portion of the indirect costs which is equal to the product of the overall quarterly indirect costs multiplied by the quarterly
manufacturing
shortfall rate is recognized as costs of revenues. The determination of the standard manufacturing capacity is subject to significant
assumptions such as expected demand for our products, expected industry sales growth and manufacturing schedules. Management’s determination
of
deviations from quality standards is based on qualitative assessment, historical data and our experience.
We periodically evaluate the condition and analyze the age of inventories
and make provisions for slow-moving inventories accordingly.
Unfavorable changes in market conditions may result in a need for additional
inventory reserves that could adversely impact our gross margins.
Conversely, favorable changes in demand could result in higher gross
margins when we sell products.
We periodically assess the
potential effect on inventory in cases of deviations from quality standards in the manufacturing process to identify
potential required
inventory write offs. Such assessment is subject to our professional judgment.
Inventory that is produced
following a change in manufacturing process prior to final approval of regulatory authorities is subject to our
assessment as to the probability
of obtaining such approval. We periodically reassess the probability of such approval and the remaining shelf life of such
inventory.
If regulatory approval is not granted, the cost of this inventory will be charged to research and development expenses.
Impairment of Non-financial Assets
We evaluate the need to record
an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances
indicate that the carrying amount
is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced
to their recoverable
amount. The recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected
future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of
an asset that does not
generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment
losses are recognized in profit or loss.
An impairment loss of an asset,
other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset’s
recoverable amount
since the last impairment loss was recognized. Reversal of an impairment loss, as above, will not be increased above the lower of the
carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset
in prior years
and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.
During the year ended December
31, 2024, we recognized a $0.6 million impairment loss on intangible assets associated with distribution rights of
certain pharmaceutical products in our
Distribution segment.
Goodwill impairment
We review goodwill for impairment
once a year, on December 31, or more frequently if events or changes in circumstances indicate that our
goodwill may be impaired.
Goodwill is tested for impairment
by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the
goodwill has been allocated.
An impairment loss is recognized if the recoverable amount of the cash-generating unit (or group of cash-generating units) to
which goodwill
has been allocated is less than the carrying amount of the cash-generating unit (or group of cash-generating units). Any impairment loss
is
allocated first to goodwill. Impairment losses recognized for goodwill cannot be reversed in subsequent periods.
The goodwill is attributed
to the Proprietary Products segment, which represents the lowest level within the Company at which goodwill is
monitored for internal
management purposes.
As of December 31, 2024, we
performed an assessment for goodwill impairment for our Proprietary Products segment, which is the level at which
goodwill is monitored
for internal management purposes and concluded that the fair value of the Proprietary Products segment exceeds the carrying amount
by
approximately 24%. The carrying amount of goodwill assigned to this segment is $30.3 million.
When evaluating the fair value
of the Proprietary Products segment, the Company used a discounted cash flow model which utilized Level 3
measures that represent unobservable
inputs. Key assumptions used to determine the estimated fair value include: (a) internal cash flows forecasts for five
years following
the assessment date, including expected revenue growth, costs to produce, operating profit margins and estimated capital needs; (b) an
estimated terminal value using a terminal year long-term future growth rate of -5.0% determined based on the long-term expected prospects
of the reporting
unit; and (c) a discount rate (post-tax) of 12.2 % which reflects the weighted-average cost of capital adjusted for the
relevant risk associated with the
Proprietary Products segment’s operations.
85
Actual results may
differ from those assumed in our valuation method. It is reasonably possible that our assumptions described above could
change in
future periods. If any of these were to vary materially from our plans, we may record impairment of goodwill allocated to the
Proprietary
Products segment reporting unit in the future. A hypothetical decrease in the growth rate of 1% or an increase of 1% to
the discount rate would have
reduced the fair value of the Proprietary Products segment reporting unit by approximately $5.1 million
and $21.2 million, respectively. The sensitivity
analysis described above did not lead to an increase of the recoverable amount over
the carrying amount. Based on our assessment as of December 31,
2024, no goodwill was determined to be impaired. For more
information see Note 10 to our consolidated financial statements included in this Annual
Report for more details.
Research and development costs
Research and development expenditures
are recognized in profit or loss when incurred and include preclinical and clinical costs (as well as cost of
materials associated with
the development of new products or existing products for new therapeutic indications). In addition, these costs include additional
product
development activities with respect to approved and distributed products as well as post marketing commitment research and development
activities.
Since our development projects
are often subject to regulatory approval procedures and other uncertainties, the conditions for the capitalization of
costs incurred before
receipt of approvals are not normally satisfied and therefore, development expenditures are recognized in profit or loss when
incurred.
Share-based Payment Transactions
Our employees and directors
are entitled to remuneration in the form of equity-settled share-based payment transactions (options and restricted
share units).
The cost of equity-settled
transactions is measured at the fair value of the equity instruments granted at grant date. We use the binomial model
when estimating
the grant date fair value of equity settled share options. We selected the binomial option pricing model as the most appropriate method
for
determining the estimated fair value of our share-based awards without market conditions. We use the share price at the grant date
when estimating the
grant date fair value of equity settled restricted share units.
The determination of the grant
date fair value of options using an option pricing model is affected by estimates and assumptions regarding several
complex and subjective
variables. These variables include the expected volatility of our share price over the expected term of the options, share option
exercise
and cancellation behaviors, expected exercise multiple, risk-free interest rates, expected dividends and the price of our ordinary shares
on the
TASE (or Nasdaq for persons who are subject to U.S. federal income tax), which are estimated as follows:
●
Expected Life. The expected life of the share options is based on historical data and is not necessarily indicative of the exercise patterns of
share options that may occur in the future.
●
Volatility. The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices on the TASE is
reasonably indicative of expected future trends.
●
Risk-free interest rate. The risk-free interest rate is based on the yields of non-index-linked Bank of Israel treasury bonds with maturities
similar to the expected term of the options for each option group.
●
Expected forfeiture rate. The post-vesting forfeiture rate is based on the weighted average historical forfeiture rate.
●
Dividend
yield and expected dividends. While on March 5, 2025, we announced a special cash dividend
of $0.20 per share (approximately
$11.5 million in the aggregate), with a record date (ex-dividend
date) of March 17, 2025, which shall be paid on April 7, 2025, we have
historically retained
our earnings to finance operations and expand our business and may not pay additional cash
dividends in the future.
Through the end of 2024, we assumed a dividend yield and expected
dividends of zero.
●
Share price. The price of our ordinary shares on the TASE (or Nasdaq for persons who are subject to U.S. federal income tax) used in
determining the grant date fair value of options is based on the price on the grant date.
If any of the assumptions
used in the binomial model change significantly, share-based compensation for future awards may differ materially
compared with the awards
granted previously.
The cost of equity-settled
transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period which the
performance
and/or service conditions are to be satisfied, ending on the date on which the relevant grantee become fully entitled to the award. The
cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects the
extent to which the
vesting period has expired and our best estimate of the number of equity instruments that will ultimately vest. The
expense or income recognized in profit
or loss represents the change between the cumulative expense recognized at the end of the reporting
period and the cumulative expense recognized at the
end of the previous reporting period.
No expense is recognized for
awards that do not ultimately vest.
86
If we modify the conditions
on which equity instruments were granted, an additional expense is recognized for any modification that increases the
total fair value
of the share-based payment arrangement or is otherwise beneficial to the grantee at the modification date.
If a grant of an equity instrument
is cancelled, it is accounted for as if it had vested on the cancellation date, and any expense not yet recognized
for the grant is recognized
immediately. However, if a new grant replaces the cancelled grant and is identified as a replacement grant on the grant date, the
cancelled
and new grants are accounted for as a modification of the original grant, as described above.
Post-employment Benefits Liabilities
Our post-retirement benefit
plans are normally financed by contributions to pension funds or similar entities, including insurance companies, and
are classified as
defined contribution plans or defined benefit plans.
We operate a defined benefit
plan in respect of severance pay pursuant to the Israeli Severance Pay Law, 1963. See Note 2k and Note 16 to our
consolidated financial
statements included in this Annual Report for more details.
The present value of our severance
pay depends on several factors that are determined on an actuarial basis using several assumptions. The
assumptions used in determining
the net cost or income for severance pay and plan assets include a discount rate. Any changes in these assumptions will
impact the carrying
amount of severance pay and plan assets.
Other key assumptions inherent
to the valuation include employee turnover, inflation, expected long term returns on plan assets and future payroll
increases. The expected
return on plan assets is determined by considering the expected returns available on assets underlying the current investments
policy.
These assumptions are given a weighted average and are based on independent actuarial advice and are updated on an annual basis. Actual
circumstances may vary from these assumptions, giving rise to a different severance pay liability.
A sensitivity analysis was
performed based on reasonably possible changes of the principal assumptions (discount rate and future salary increases)
underlying the
defined benefit plan.
If the discount rate would
be one percent higher or lower, and all other assumptions were held constant, the defined benefit obligation would
decrease by $81,000
or increase by $119,000, respectively.
If the expected salary growth
would increase or decrease by one percent, and all other assumptions were held constant, the defined benefit
obligation would increase
by $113,000 or decrease by $77,000, respectively.
Since August 2022, Kamada Inc., our U.S. wholly
owned subsidiary has a 401(k) defined contribution plan covering certain employees in the
United States. All eligible employees may elect
to contribute up to 100% of their annual compensation to the plan through salary deferrals, subject to
Internal Revenue Service limits.
For the year ended December 31, 2024, the contribution limit was $23,000 per year (for certain employees over 50 years
of age the maximum
contribution was $30,500 per year). The U.S. subsidiary matches 3% of employee contributions up to the combined maximum
employee and employer
contributions totaling $69,000 (for certain employees over 50 years of age the maximum contribution was $76,500 per year).
Taxes on income
Current and Deferred taxes
Taxes on income in profit
or loss comprise of current taxes, deferred taxes and taxes in respect of prior years, which are mainly recognized in
profit or loss.
Deferred tax assets are
reviewed at the end of each reporting period and reduced to the extent that it is not probable that they will be utilized.
Deductible
carryforward losses and temporary differences for which deferred tax assets have not been recognized are reviewed at the end of each reporting
period, and a respective deferred tax asset is recognized to the extent that their utilization is probable.
We operate in multiple tax
jurisdictions. Deferred taxes are offset in the statement of financial position if there is a legally enforceable right to
offset a current
tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.
As of December 31, 2024,
we recorded a $1.1 million of tax income, most of which is with respect to deferred tax asset on account of the
remaining NOLs and other
temporary differences as we estimated that their utilization is probable in the foreseeable future.
Uncertain tax positions
We evaluate potential uncertain
tax positions, including additional tax and interest expenses, and recognize a provision when it is more probable
than not that we will
have to use our economic resources to pay such obligation.
As of December 31, 2024,
and 2023, the application of IFRIC 23 did not have a material effect on the financial statements.
87
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth
certain information relating to our executive officers and directors as of March 5, 2025.
Name
Age
Position
Executive Officers:
Amir London
56
Chief Executive Officer
Chaime Orlev
54
Chief Financial Officer
Eran Nir
52
Chief Operating Officer
Yael Brenner
61
Vice President, Quality
Hanni Neheman
55
Vice President, Marketing & Sales
Nir Livneh
46
Vice President, General Counsel and Corporate Secretary
Orit Pinchuk
59
Vice President, Regulatory Affairs and PVG
Liron Reshef
54
Vice President, Human Resources
Jon Knight
59
Vice President, U.S. Commercial Operations
Shavit Beladev
54
Vice President, Plasma Operations
Boris Gorelik
44
Vice President, Business Development and Strategic Programs
Directors:
Lilach Asher-Topilsky (1)(3)
54
Chair of the Board of Directors, Chair of the Strategy Committee
Uri Botzer (1)(3)
36
Director
Ishay Davidi (1)
63
Director
Prof. Benjamin Dekel (1)(2)
58
External Director
Karnit Goldwasser (1)
48
Director
Assaf Itshayek (1)(2)
52
External Director, Chairman of Audit Committee, Chairman of the Compensation
Committee
Lilach Payorski (1)(2)
52
Director
Leon Recanati (1)
76
Director
David Tsur (1)(3)
74
Director
(1)
Independent director under the Nasdaq listing requirements.
(2)
Member of the Audit Committee and the Compensation Committee.
(3)
Member of the Strategy Committee.
88
Executive Officers
Amir London has served
as our Chief Executive Officer since July 2015. Prior to that, Mr. London served as our Senior Vice President, Business
Development from
December 2013. Mr. London brings with him over 25 years of senior management and international business development experience.
From 2011
to 2013, Mr. London served as the Chief Operating Officer of Fidelis Diagnostics, a U.S.-based provider of innovative in-office medical
diagnostic services. Earlier in his career, from 2009 to 2011, Mr. London was the Chief Executive Officer of Promedico, an Israeli-based
$350 million
healthcare distribution company, and from 2006 to 2009 he was the General Manager of Cure Medical, providing contract manufacturing
services for
clinical studies, as well as home-care solutions. From 1995 to 2006, Mr. London was a Partner with Tefen, an international
publicly traded operations
management consulting firm, responsible for the firm’s global biopharma practice. Mr. London holds a
B.Sc. degree in Industrial and Management
Engineering from the Technion – Israel Institute of Technology.
Chaime Orlev has served
as our Chief Financial Officer since December 2017. Prior to that, Mr. Orlev had served in senior finance roles for more
than 20 years,
with approximately 12 years spent in the life sciences industry. Previously, from September 2016 to November 2017, Mr. Orlev served as
Chief Financial Officer and Vice President Finance and Administration at Bioblast Pharma Ltd. (Nasdaq: ORPN), a clinical-stage, biotechnology
company.
Prior to that, from 2010, Mr. Orlev served as Vice President Finance and Administration at Chiasma (Nasdaq: CHMA), a clinical
stage biopharmaceutical
company, in which role Mr. Orlev led the company’s initial public offering and listing on Nasdaq. Mr. Orlev
holds a BA degree in Business Administration
from the College of Management in Israel, an MBA degree from the Recanati Graduate School
of Business Administration at the Tel Aviv University and
is a certified public accountant in Israel.
Eran Nir has served
as our Chief Operating Officer since March 2022, overseeing our operations and research and development activities. Prior to
that Mr.
Nir served as our Vice President, Operations from November 2016. Mr. Nir has over 20 years of operations management experience in the
pharmaceutical and medical industries. Mr. Nir’s previous roles include management of Teva Pharmaceutical Industries’ plant
in Jerusalem from 2002 to
2011, VP Operations of Amelia Cosmetics from 2014 to 2015 and management of a medical equipment plant of Philips
Medical Systems from 2015 to
2016. Mr. Nir’s experience spans across the management of large-scale FDA and EMA- approved manufacturing
facilities, tech-transfer of new products
from development to production and the implementation of operational excellence systems. Mr.
Nir holds a B.Sc. degree in Industrial and Management
Engineering and an MBA degree, both from Ben-Gurion University.
Yael Brenner has served
as our Vice President, Quality since March 2015. Ms. Brenner has more than 25 years of experience in Quality
Management, including Quality
Assurance and Quality Control managerial positions in the pharmaceutical industry. Prior to joining Kamada, from 2007 to
2015, Ms. Brenner
was at Teva Pharmaceuticals Industries, lastly as Senior Director Quality Operations of Teva’s Kfar Sava Site, managing over 400
employees in Quality Assurance, Quality Control and Regulatory Affairs. Ms. Brenner holds B.Sc. and M.Sc. degrees in Chemistry from the
Technion -
Israel Institute of Technology, and she is a Certified Quality Engineer (CQE) from the American and Israeli Societies for Quality.
Hanni Neheman has served
as our Vice President, Marketing & Sales since January 2020. Ms. Neheman joined us in August 2014 and served as
Head of Business Operations,
Israel. Ms. Neheman has more than 20 years of experience in different positions in the field of marketing and sales in the
pharmaceutical
industry. Prior to joining us, Ms. Neheman served as a Commercial Manager at Neopharm Israel. Ms. Neheman holds a B.A. degree in
Occupational
Therapy from the Technion Israel Institute of Technology and Executive M.B.A degree from Derby University.
Nir
Livneh has served as our VP General Counsel and Corporate Secretary since April 2023. Mr. Livneh previously served as our General
Counsel
and Corporate Secretary, from 2010-2018. Prior to rejoining Kamada, Mr. Livneh served as Vice President of Legal Affairs at Purple
Biotech Ltd.
Previously, Mr. Livneh served as Legal Counsel at ICL Group Ltd. and General Counsel of PolyPid Ltd. Mr. Livneh is a member
of the Israel Bar
Association and holds an LL.B. (Bachelor of Law) and a B.A. degree in Business Administration from the Reichman University,
Herzliya, Israel, and an
LL.M degree from Tel Aviv University, Israel.
Orit Pinchuk has served
as our Vice President, Regulatory Affairs and PVG since October 2014. Ms. Pinchuk has experience of more than 25
years in the pharmaceutical
industry in key positions that cover, among others, disciplines of Regulatory Affairs and Compliance. Prior to joining Kamada,
from 1993
to 2014, Ms. Pinchuk was at Teva Pharmaceuticals Industries, where she served as Director of Compliance and Regulatory Affairs, Operation
Israel and Senior Director Regulatory Affairs, Research and Development and Operation Israel. Ms. Pinchuk has experience working with
the FDA, EMA
and the Canadian Health Authorities. Ms. Pinchuk holds a B.Tech degree in Textile Chemistry from Shenkar College for Engineering
and Design and
M.Sc. degree in Applied Chemistry from the Hebrew University of Jerusalem.
89
Liron Reshef joined
us as our Vice President, Human Resources in January 2023. Ms. Reshef has over 20 years of experience in the field of human
resources
in senior Human Resources positions at global companies in different industries. From 2018 to 2021, Ms. Reshef served as EVP Human
Resources
of TAT Technologies and from 2014 to 2018, she served as VP Human Resources of Evogene. Earlier in her career, Ms. Reshef worked in senior
HR positions for Frutarom, Solbar Industries, Comverse Technology and TICI Software Systems. Ms. Reshef is a certified Coach, specialized
in personal
coaching, career development and managers’ coaching. Ms. Reshef holds a B.A degree. in Economics and Political Science
from Bar-Ilan University and
MBA degree, with specialization in Behavioral Sciences, from Ben-Gurion University, Israel.
Jon Knight has
served as our Vice President of US Commercial Operations since March 2022. Mr. Knight has over 25 years of Life Sciences
experience, primarily
focusing on commercializing innovative specialty plasma-products. Prior to joining us, Mr. Knight served in a variety of commercial
leadership
positions. Previously Mr. Knight was responsible for Trade Relations at TherapeuticsMD, launching three innovative products
into the U.S.
market. Mr. Knight’s professional background also includes leadership positions at Prometic Life Sciences, CIS by
Deloitte, Cardinal Health, Cangene
BioPharma and Nabi Biopharmaceuticals. Mr. Knight holds an MBA degree from Colorado State University
and a B.A. degree in Biology from Colorado
Mesa University.
Shavit Beladev has
served as our Vice President, Plasma Operations since June 2022. Ms. Beladev has been with us for over 20 years in
increasingly senior
positions, most recently as Director of Business Development. Ms. Beladev previously served in management roles responsible for
International
Sales, Key Accounts Management and Plasma Procurement. Since the establishment of Kamada Plasma in early 2021, Ms. Beladev’s
extended
responsibilities have also included overseeing the Company’s plasma collection operations through its U.S. subsidiary Kamada Plasma
LLC. Ms.
Beladev holds a B.A. degree in Economics and Business Administration from Ben-Gurion University, Israel.
Boris Gorelik has
served as our Vice President, Business Development and Strategic Programs since June 2022. Prior to that, Mr. Gorelik served
as our Director
of Business Development from April 2020. Mr. Gorelik has over 14 years of Business Development and M&A experience, most of it in
the
pharmaceutical industry. Prior to joining us, Mr. Gorelik was Senior Director of Global Business Development and Strategy with Teva
Pharmaceutical
Industries, Ltd. Prior to his tenure at Teva, Mr. Gorelik served in various legal, M&A, and transaction services-related
roles in the Israeli law office of
Goldfarb Seligman, as well as KPMG and Deloitte Israeli offices. Mr. Gorelik holds a LL.B. degree,
B.A. degree in Accounting and MBA degree, all from
Tel Aviv University.
Directors
Lilach Asher-Topilsky has
served as a member of our board of directors since December 2019, as the Chair of our board of directors since August
2020, served
as a member of our Compensation Committee from August 2020 until August 2023 and serves as a member of our Strategy Committee since
November
2023. Ms. Asher-Topilsky has been a Senior Partner in the FIMI Opportunity Funds, Israel’s largest group of private equity funds,
since
December 2019. Ms. Asher-Topilsky currently serves as the chair of the board of directors of Rimoni Industries Ltd. (TASE), SOS
Ltd. Elyakim Ben Ari
Group Ltd., Amal and Beyond Ltd. and Marom Dolphin Ltd. and as a director at Amiad Water Systems Ltd. (AIM), Ashot
Ashkelon Industries Ltd.
(TASE) and Tel Aviv University. Prior to joining FIMI, Ms. Asher-Topilsky served as the President and CEO
of Israel Discount Bank (TASE), one of the
leading banking groups in Israel, as the Chairman at IDBNY BANKCORP and as a director at IDB
Bank New York from 2014 – 2019. Ms. Asher-Topilsky
also served as the Chairman of Mercantile Bank from 2014 – 2016.
Before that, Ms. Asher-Topilsky served as a member of the management of Bank
Hapoalim (TASE) as Deputy CEO & Head of Retail
Banking Division (2009 – 2013) & Head of Strategy & Planning Division (2007 – 2009).
Ms. Asher-
Topilsky served as a Strategy Consultant at The Boston Consulting Group (BCG, Chicago 1997 – 1998)
and at Shaldor Strategy Consulting (Israel 1995 –
1996). Ms. Asher-Topilsky holds an M.B.A. degree from Kellogg
School of Management, Northwestern University, Chicago, USA (1997) and a B.A.
degree in Management and Economics from Tel Aviv University,
Israel (Magna Cum Laude, 1994).
Uri Botzer has served
as a member of our board of directors since December 2022. Mr. Botzer has been a Junior Partner in the FIMI Opportunity
Funds, Israel’s
largest group of private equity funds, since 2019. Mr. Botzer currently serves as a director at Marom Dolphin Ltd. Prior to joining FIMI,
Mr.
Botzer served as a lawyer at FISCHER (FBC & Co.). Mr. Botzer holds a B.A. degree in Business Administration and a LL.B. (Bachelor
of Law), Cum
Laude, from Reichman University, Herzliya.
Ishay Davidi has served
on our board of directors since December 2019. Mr. Davidi is the Founder and has served as Chief Executive Officer of
the FIMI Opportunity
Funds, Israel’s largest group of private equity funds, since 1996. Mr. Davidi currently serves as the Chairman of the Board
of
Directors of Polyram Plastic Industries Ltd. (TASE), Ashot Ashkelon Industries Ltd. (TASE), and Bio-Lab Ltd. Mr. Davidi also serves
as a director of Bet
Shemesh Engines Ltd. (TASE), C. Mer Industries Ltd. (TASE), G1 Security Systems Ltd. (TASE), PCB Technologies
Ltd. (TASE), Rekah Pharmaceutical
Industries (TASE), SOS Ltd., GreenStream Ltd., Amiad Water Systems Ltd. (AIM), Rimoni Industries Ltd.
(TASE), Elyakim Ben-Ari Group Ltd. and
Amal and Beyond Ltd. Mr. Davidi previously served as the Chairman of the board of directors
of Infinya Ltd. (TASE), Inrom, Retalix (previously traded on
NASDAQ and TASE) and Tefron Ltd. (NYSE and TASE) and as a director of Gilat
Satellite Networks Ltd. (NASDAQ and TASE), Pharm Up Ltd (TASE),
Ham-Let Ltd. (TASE), Ormat Industries Ltd. (previously traded on
TASE), Lipman Electronic Engineering Ltd. (NASDAQ and TASE), Merhav Ceramic
and Building Materials Center Ltd. (NASDAQ and TASE), Orian
C.M. Ltd. (TASE), Ophir Optronics Ltd., Overseas Commerce Ltd. (TASE), Scope
Metals Group Ltd. (TASE), Tadir-Gan (Precision
Products) 1993 Ltd. (TASE) and Formula Systems Ltd. (NASDAQ and TASE). Prior to establishing
FIMI, from 1993 until 1996, Mr. Davidi
was the Founder and Chief Executive Officer of Tikvah Fund, a private Israeli investment fund. From 1992 until
1993 Mr. Davidi served
as the Chief Executive Officer of Zer Science Industries Ltd. Mr. Davidi holds an M.B.A. degree from Bar Ilan University, Israel,
and a B.Sc. degree, with honors, in Industrial Engineering from the Tel Aviv University, Israel.
90
Prof. Benjamin Dekel
has served as an external director (within the meaning of the Companies Law) since August 2023 and serves as a member of
our Audit Committee
and Compensation Committee. Prof. Dekel currently serves as the Founder and Chief Scientist of RenoVate Biopharmaceuticals Ltd.,
as director
at Sagol Center for Regenerative Medicine, Tel Aviv University; as Vice-Dean, School of Medicine, Tel Aviv University; Chief, Pediatric
Nephrology and Pediatric Stem Cell Research Institute, Sheba Medical Center; as a member of the Higher Committee on Cell and Gene Therapy,
Israel
Ministry of Health; and as a member of the Scientific Advisory Board, Stemrad, Ltd. From June 2009 until June 2020, Prof.
Dekel served as Chief Scientist
and a member of the board of directors of KidneyCure Inc. In 2011, Prof. Dekel Served as a Visiting Scholar
at Stanford University. From January 2003 to
January 2005, Prof. Dekel Served as a Fellow at the Weizmann Institute. Prof. Dekel
holds an MD degree in Medicine from the Technion — Israel Institute
of Technology and a PhD in Immunology & Transplantation
Biology from the Weizmann Institute.
Karnit Goldwasser has
served on our board of directors since December 2019 and served as a member of our Audit Committee and Compensation
Committee from
January 2020 until August 2023. Ms. Goldwasser serves as an independent consultant and environmental engineer for various agencies
and
organizations. Ms. Goldwasser is a director at Delek San Recycling Ltd. (since December 2016). Ms. Goldwasser previously served as
a director at
ELA Recycling Corporation (2015 – September 2021), Orian DB Schenker (2017 – 2020)
and at the government-owned Environmental Services Company
Ltd., as chair of the Safety Committee (2010 – 2016) and
as a member of the Tel Aviv-Jaffa City Council, holding the environmental portfolio (2013 –
2016). Ms. Goldwasser
also served as a director in several Tel Aviv-Jaffa municipality corporations: Dan Municipal Sanitation Association, as chair of
the
audit committee; Tel Aviv-Jaffa Economic Development Authority; and Ganei Yehoshua Co. Ltd. Ms. Goldwasser holds a B.Sc. degree
in Environmental
Engineering, focusing on chemistry, mathematics and environmental engineering, a M.Sc. degree in Civil Engineering, specializing
in Hydrodynamics and
Water Resources, both from the Technion — Israel Institute of Technology, and a M.A. degree in Public
Policy and Administration from the Lauder School
of Government, Diplomacy and Strategy, IDC Herzliya. Ms. Goldwasser also completed the
Directors Program at LAHAV, School of Management, Tel
Aviv University.
Assaf Itshayek has
served as an external director (within the meaning of the Companies Law) since August 2023 and is the Chairman of our Audit
Committee
and Compensation Committee. Mr. Itshayek has over 15 years of hi-tech industry experience in senior management and finance executive
positions
in different industries (including online, fintech and energy). Mr. Itshayek currently serves as a member of the board of directors of
GoTo Global
Ltd., Qira Ltd. and Nostromo Energy Holdings Corporation. From June 2021 until October 2022, Mr. Itshayek served as the chief
executive officer of
NeraTech Media Ltd. Prior thereto, from November 2012 until June 2021, Mr. Itshayek was at Somoto Ltd. (TASE: SMTO),
initially as the chief financial
officer and from December 2017, as the chief executive officer. Prior thereto, Mr. Itshayek served as
the chief financial officer of BlueSnap Inc. (from
February 2021 until January 2021) and Digital Power Corporation Ltd. (from June 2009
until May 2011) and served as the corporate controller of Metalink
Ltd. from June 2006 until August 2008. From December 1999 until July
2006, Mr. Itshayek served as a TMT senior audit manager at Deloitte Brightman
Almagor Zohar & Co., a Firm in the Deloitte Global Network.
Mr. Itshayek holds a B.A. degree in Business Administration and Accountancy from the
College of Management and an M.B.A. degree from Tel
Aviv University.
Lilach Payorski has
served on our board of directors since December 2021 and serves as a member of our Audit Committee. Ms. Payorski served
as the Chair of
our Audit Committee from December 2021 to October 2023. Ms. Payorski served as the Chief Financial Officer of Tyto Care Ltd. from
November 2022
until March 2023. Prior to that, Ms. Payorski served as the Chief Financial Officer of Stratasys Ltd. (NASDAQ: SSYS), a developer
and
manufacturer of 3D printers and additive solutions, from January 2017 to February 2022. From December 2012 until December 2016,
Ms. Payorski served
as Senior Vice President, Corporate Finance at Stratasys. From December 2009 to December 2012, Ms. Payorski
served as Head of Finance at PMC-
Sierra (NASDAQ: PMCS), a company operating in the semiconductors industry, which was subsequently
acquired by Microsemi Corporation. Prior to that,
from March 2005 to December 2009, Ms. Payorski served as Compliance Controller
at Check Point Software Technologies Ltd. (NASDAQ: CHKP), a
security company. Ms. Payorski also served as corporate controller at
Wind River Systems (NASDAQ: WIND), a software company, which was
subsequently acquired by Intel Corporation, from June 2003
to March 2005. Earlier in her career, from March 1997 to June 2003, Ms. Payorski worked as a
chartered public accountant
at Ernst & Young LLP, both in Israel and later in Palo Alto, CA. Ms. Payorski currently serves as the chairman of the audit
committee of ODDITY Ltd. (NASDAQ: ODD) and Gauzy Ltd. (NASDAQ: GAUZ). Ms. Payorski also served as the chairman of the audit committee
of
Scodix Ltd. (TASE: SCDX). Ms. Payorski holds a B.A. degree in Accounting and Economics from Tel Aviv University. Ms. Payorski
also completed the
Board of Directors and Senior Corporate Officers Program at LAHAV, School of Management, Tel Aviv University.
Leon Recanati has served
on our board of directors since May 2005, as the Chairman of our board of directors from March 2013 to August 2020
and served
as the Chairman of our Compensation Committee from February 2019 until September 2023. Mr. Recanati currently serves as
the Chairman of
MadaTech, National Museum of Science Technology and Space in memory of Daniel and Mathilde Recanati. Mr. Recanati also
serves as a member of the
board of directors of Evogene Ltd., a plant genomics company listed on the TASE and New York Stock Exchange.
Mr. Recanati is also a board member of
the following private companies: GlenRock Israel Ltd., Gov, RelTech Holdings Ltd., Legov Ltd.,
Insight Capital Ltd., Shavit Capital Funds and Ofil Ltd.
Mr. Recanati currently serves as the Chairman and Chief Executive Officer
of GlenRock. Previously, Mr. Recanati was Chief Executive Officer and/or
Chairman of IDB Holding Corporation Ltd., Clal Industries
Ltd., Azorim Investment Development and Construction Co Ltd., Delek Israel Fuel
Corporation and Super-Sol Ltd. Mr. Recanati
also founded Clal Biotechnologies Industries Ltd., a biotechnology investment company operating in Israel.
Mr. Recanati holds an
M.B.A. degree from the Hebrew University of Jerusalem and Honorary Doctorates from the Technion — Israel Institute of
Technology and Tel Aviv University.
91
David Tsur has served
on our board of directors since our inception and serves as a member of our Strategy Committee. Mr. Tsur served as the
Active Deputy
Chairman on a half-time basis from July 2015 until December 31, 2019. Mr. Tsur served as our Chief Executive Officer
from our inception
until July 2015. Mr. Tsur currently serves as the Chairman of the Board of Directors of Kanabo Ltd. (LSE)
and as a director of BioHarvest Sciences Inc.
(CSE). Prior to co-founding Kamada in 1990, Mr. Tsur served as Chief Executive
Officer of Arad Systems and RAD Chemicals Inc. Mr. Tsur previously
served as the Chairman of the Board of Directors of CollPlant
Ltd., a company listed on the TASE and OTC market. Mr. Tsur has also held various
positions in the Israeli Ministry of Economy and
Industry (formerly named the Ministry of Industry and Trade), including Chief Economist and
Commercial Attaché in Argentina and
Iran. Mr. Tsur holds a B.A. degree in Economics and International Relations and an M.B.A. degree in Business
Management, both from
the Hebrew University of Jerusalem.
Under a shareholders’
agreement entered into on March 6, 2013, the Recanati Group, on the one hand, and the Damar Group, on the other hand,
have each agreed
to vote the ordinary shares beneficially owned by them in favor of the election of director nominees designated by the other group as
follows: (i) three director nominees, so long as the other group beneficially owns at least 7.5% of our outstanding share capital, (ii)
two director nominees,
so long as the other group beneficially owns at least 5.0% (but less than 7.5%) of our outstanding share capital,
and (iii) one director nominee, so long as
the other group beneficially owns at least 2.5% (but less than 5.0%) of our outstanding share
capital. In addition, to the extent that after the designation of
the foregoing director nominees there are additional director vacancies,
each of the Recanati Group and Damar Group have agreed to vote the ordinary
shares beneficially owned by them in favor of such additional
director nominees designated by the party who beneficially owns the larger voting rights in
our company. See “Item 7. Major Shareholders
and Related Party Transactions — Related Party Transactions — Shareholder Agreement.”
B. Compensation
Aggregate Compensation of Directors and
Officers
The aggregate compensation
incurred by us in relation to our executive officers and directors, including share-based compensation, for the year
ended December 31,
2024, was approximately $4.7 million. This amount includes approximately $0.39 million set aside or accrued to provide pension,
severance,
retirement or similar benefits or expenses, but does not include business travel, professional and business association dues and expenses
reimbursed to executive officers, and other benefits commonly reimbursed or paid by companies in Israel.
From time to time, we grant options to our employees,
officers and directors and, in the past, granted restricted share units to our officers and several of our
employees. We did not grant
any options to our officers and directors during the year ended December 31, 2024.
As of December 31, 2024, options to purchase 1,641,550 of our ordinary
shares granted to our Israeli based officers and directors as a group were
outstanding, of which options to purchase 975,050 of our ordinary
shares were vested, with a weighted average exercise price of NIS 19.85 per ordinary
share. In addition, as of December 31, 2024, options
to purchase 120,000 of our ordinary shares granted to our U.S. based officers as a group were
outstanding, of which options to purchase
60,000 of our ordinary shares were vested, with a weighted average exercise price of $5.46 per ordinary share.
For details regarding the
beneficial ownership of our shares by our officers and directors, see “Item 6. Directors, Senior Management and Employees —
Share Ownership.”
Compensation of Directors
We pay our directors an annual
fee and per-meeting fees in the maximum amounts payable from time to time for such fees by us under the Second
and Third Addendums, respectively
(or, to the extent any director is determined to have financial and accounting expertise and is deemed an expert director
(in each case,
within the meaning of the Companies Law and the regulations thereunder), under the Fourth Addendum) to the Israeli Companies
Regulations
(Rules Regarding Compensation and Expense Reimbursement of External Directors), 2000, or the Compensation Regulations. In accordance
with
the Compensation Regulations, we currently pay our directors an annual fee of NIS 97,326 (approximately $26,311) as well as a fee
of NIS 3,747
(approximately $1,013) for each board or committee meeting attended in person, NIS 2,248 (approximately $608) for
each board or committee meeting
attended via telephone or videoconference and NIS 1,874 (approximately $506) for participation by
written consent.
There are no arrangements
or understandings between us, on the one hand, and any of our directors, on the other hand, providing for benefits upon
termination of
their service as directors of our company.
To our knowledge, there are
no agreements and arrangements between any director and any third party relating to compensation or other payment
in connection with their
candidacy or service on our Board of Directors.
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Compensation of Covered Executives
The following table presents
information regarding compensation accrued in our financial statements for our five most highly compensated office
holders (within the
meaning of the Companies Law), namely our Chief Executive Officer, Chief Financial Officer, Vice President, Business Development
and Strategic
Programs, Chief Operating Officer and Vice President, US Commercial Operations, during or with respect to the year ended December 31,
2024. Each such office holder was covered by our directors’ and officers’ liability insurance policy and was entitled to indemnification
and exculpation in
accordance with indemnification and exculpation agreements, our articles of association and applicable law.
Name and Position
Salary(1)
Bonus(2)
Value of
Options
Granted(3)
Other(4)
Total
(in thousands)
Amir London
Chief Executive Officer
$
421
224
121
29
794
Chaime Orlev
Chief Financial Officer
$
351
103
111
24
590
Eran Nir
Chief Operating Officer
$
309
91
31
17
448
Boris Gorelik
Vice President, Business Development and Strategic
Programs
$
246
40
25
ׁ106
417
Jon Knight
Vice President, U.S. Commercial Operations
$
232
70
24
326
(1) Salary includes gross salary and fringe benefits.
(2) Bonuses includes annual bonuses. The annual bonus is subject to the fulfillment of certain targets determined for each year by the compensation
committee and board of directors.
(3) The value of options is the expense recorded in our financial statements for the period ended December 31, 2024 with respect to all options granted to
such executive officer.
(4) Cost of housing and personal expenses, and allowance for the use of a company car net of reimbursement by social security of certain salary expenses,
each to the extent applicable.
Agreements with Five Most Highly Compensated
Office Holders
We have entered into agreements
with each of our five most highly compensated office holders (within the meaning of the Companies Law), listed
below. The terms of employment
or service of such office holders are directed by our compensation policy. See below “— Compensation Policy.” Each of
these agreements contains provisions regarding non-competition, confidentiality of information and assignment of inventions. The enforceability of
covenants not to
compete in Israel and the United States is subject to limitations. Such office holders are entitled to an annual bonus subject to the
fulfillment of certain targets determined for each year by the compensation committee and board of directors. In addition, our Israeli
based executive
officers are entitled to a company car, as well as sick pay, convalescence pay, manager’s insurance and a study
fund (“keren hishtalmut”) and annual leave,
all in accordance with Israeli law and our compensation policy for executive
officers, and our U.S.-based executive officers are entitled to benefits
customary to U.S. executives such as medical benefits and 401(k)
plan, and in certain cases to relocation related remuneration.
Amir London, Chief Executive
Officer. Mr. London has served as our Chief Executive Officer since July 2015. Prior to that and effective as of
December 1, 2013,
Mr. London served as our Vice President, Business Development. Mr. London’s engagement terms as our Chief Executive Officer have
been approved by our Compensation Committee, Board of Directors and shareholders. According to the terms of the agreement, either party
may terminate
the agreement at any time upon three months’ prior written notice to the other party, and we may terminate the agreement
immediately for cause in
accordance with Israeli law.
Chaime Orlev, Chief Financial
Officer. Effective as of October 1, 2017, we entered into an employment agreement with Mr. Chaime Orlev with
respect to his employment
as our Chief Financial Officer. Either party may terminate the agreement at any time upon three months’ prior written notice
to
the other party, and we may terminate the agreement immediately for cause in accordance with Israeli law.
Eran Nir, Chief Operating
Officer. Mr. Eran Nir has served our Chief Operating Officer since March 1, 2022. Prior to that and effective as of
November 1, 2016,
Mr. Nir served as our Vice President, Operations. According to the terms of his employment agreement, either party may terminate the
agreement
at any time upon two months’ prior written notice to the other party, and we may terminate the agreement immediately for cause in
accordance
with Israeli law.
Boris Gorelik, Vice President,
Business Development and Strategic Programs. Effective as of June 2022, we entered into a three-year employment
agreement with Mr.
Boris Gorelik in connection with his relocation to the U.S. and his employment as our Vice President of Business Development with an
option
for an additional one-year extension. Prior to that Mr. Gorelik served as our Director of Business Development from April 2020. Either
party may
terminate the agreement at any time upon three months’ prior written notice to the other party, and we may terminate the
agreement immediately for cause
in accordance with U.S. law.
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Jon Knight, Vice President,
US Commercial Operations. Effective as of March15, 2022, we entered into an employment agreement with Mr. Jon
Knight with respect
to his employment as our Vice President, US Commercial Operations. Either party may terminate the agreement at any time upon three
months’
prior written notice to the other party, and we may terminate the agreement immediately for cause in accordance with U.S. law.
Other Executive Officers
We have entered into written
employment agreements with the rest of our executive officers. The terms of employment of our executive office
holders are directed by
our compensation policy. See “— Compensation Policy.” Each of these agreements contains provisions regarding non-competition,
confidentiality of information and assignment of inventions. The non-competition provision applies for a period that is generally 12 months
following
termination of employment. The enforceability of covenants not to compete in Israel and the United States is subject to limitations.
In addition, we are
required to provide up to three months’ notice prior to terminating the employment of such executive officers,
other than in the case of a termination for
cause. Each of our employment agreements with such executive officers provides for annual
bonuses, which are subject to the fulfillment of certain targets
determined for each year, and the executive officers may be also entitled
to a special bonus upon the achievement of certain company milestones.
Compensation of Directors and Executive Officers
under Israeli Law
Compensation Policy.
Under the Companies Law, a
public company is required to adopt a compensation policy, which sets forth the terms of service and employment of
office holders, including
the grant of any benefit, payment or undertaking to provide payment, any exemption from liability, insurance or indemnification,
and any
severance payment or benefit. Such compensation policy must comply with the requirements of the Companies Law. The compensation policy
must be approved at least once every three years, first, by our board of directors, upon recommendation of our compensation committee,
and second, by the
shareholders, by a special majority (referred to as the “Special Majority for Compensation”) that requires
that either:
●
a majority of the shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in
such matter and who are present and voting at the meeting, are voted in favor of approving the compensation package (excluding abstentions);
or
●
the total number of shares voted by non-controlling shareholders and shareholders who do not have a personal interest in such matter that are
voted against the compensation policy does not exceed 2% of the aggregate voting rights in the company.
Our current compensation policy
for executive officers and compensation policy for directors were each approved by our shareholders on
December 22, 2022.
Compensation of Directors
Under the Companies Law, the
compensation (including insurance, indemnification, exculpation and compensation) of our directors requires the
approval of our compensation
committee, the subsequent approval of the board of directors and, unless exempted under the regulations promulgated under
the Companies
Law, the approval of the shareholders at a general meeting. The approval of the compensation committee and board of directors must be
in
accordance with the compensation policy. In special circumstances, the compensation committee and board of directors may approve a
compensation
arrangement that is inconsistent with the company’s compensation policy, provided that they have considered the same
considerations and matters required
for the approval of a compensation policy in accordance with the Companies Law, in which case the
approval of the company’s shareholders must be by the
Special Majority for Compensation.
Where the director is also
a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply, as described
under “—Item
6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Related Party Transactions under Israeli Law —
Disclosure of Personal Interests of a Controlling Shareholder and Approval of Certain Transactions.”
Compensation of Officers Other than the
Chief Executive Officer
Pursuant to the Companies
Law, the compensation (including insurance, indemnification and exculpation) of a public company’s office holders
(other than directors,
which is described above, and the chief executive officer, which is described below) generally requires approval first by the
compensation
committee and second by the company’s board of directors, according to the company’s compensation policy. In special circumstances
the
compensation committee and board of directors may approve a compensation arrangement of such an officer that is inconsistent with
the company’s
compensation policy, provided that they have considered the same considerations and matters required for the approval
of a compensation policy in
accordance with the Companies Law and such arrangement must be approved by the company’s shareholders
by the Special Majority for Compensation.
However, if the shareholders of the company do not approve a compensation arrangement with such
an executive officer that is inconsistent with the
company’s compensation policy, the compensation committee and board of directors
may, in special circumstances, override the shareholders’ decision,
subject to certain conditions.
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Under the Companies Law, an
amendment to an existing arrangement with an office holder (other than the chief executive officer, which is
described below) who is not
a director requires only the approval of the compensation committee, if the compensation committee determines that the
amendment is not
material in comparison to the existing arrangement. However, according to regulations promulgated under the Companies Law, an
amendment
to an existing arrangement with an office holder (who is not a director) who is subordinate to the chief executive officer shall not require
the
approval of the compensation committee, if (i) the amendment is approved by the chief executive officer and the company’s compensation
policy
determines that a non-material amendment to the terms of service of an office holder (other than the chief executive officer) will
be approved by the chief
executive officer and (ii) the engagement terms are consistent with the company’s compensation policy.
Under our compensation policy for executive
officers and subject to applicable law, our chief executive officer may approve an immaterial
amendment of up to 10% of the existing terms of office and
engagement (as compared to those approved by the compensation committee) of
an executive who is subordinate to the chief executive officer (who is not
a director).
Compensation of Chief Executive Officer
The compensation (including
insurance, indemnification and exculpation) of a public company’s chief executive officer generally requires the
approval of first,
the company’s compensation committee; second, the company’s board of directors; and third (except for limited exceptions),
the
company’s shareholders by the Special Majority for Compensation. If the shareholders of the company do not approve the compensation
arrangement with
the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision,
subject to certain conditions. The
compensation committee and board of directors approval should be in accordance with the company’s
compensation policy; however, in special
circumstances, they may approve compensation terms of a chief executive officer that are inconsistent
with such policy provided that they have considered
the same considerations and matters required for the approval of a compensation policy
in accordance with the Companies Law and that shareholder
approval was obtained by the Special Majority for Compensation. Under certain
circumstances, the compensation committee and board of directors may
waive the shareholder approval requirement in respect of the compensation
arrangements with a candidate for chief executive officer if they determine that
the compensation arrangements are consistent with the
company’s stated compensation policy.
However, an amendment to an
existing arrangement with an executive officer (who is not a director) requires only the approval of the
compensation committee, if the
compensation committee determines that the amendment is not material in comparison to the existing arrangement.
Furthermore, according
to regulations promulgated under the Companies Law, the renewal or extension of an existing arrangement with a chief executive
officer
shall not require shareholder approval if (i) the renewal or extension is not beneficial to the chief executive officer as compared to
the prior
arrangement or there is no substantial change in the terms and other relevant circumstances; and (ii) the engagement terms are
consistent with the
company’s compensation policy and the prior arrangement was approved by the shareholders by the Special Majority
for Compensation.
Where the office holder is
also a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply, as
described under
“—Item 6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Related Party Transactions under
Israeli
Law — Disclosure of Personal Interests of a Controlling Shareholders and Approval of Certain Transactions.”
Exculpation, Insurance and Indemnification
of Office Holders
Under the Companies Law, a
company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company
may exculpate an office
holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of
duty
of care, but only if a provision authorizing such exculpation is included in the company’s articles of association. Our articles
of association include
such a provision. However, we may not exculpate an office holder for an action or transaction in which a controlling
shareholder or any other office holder
(including an office holder who is not the office holder we have undertaken to exculpate) has a
personal interest (within the meaning of the Companies
Law). We may also not exculpate in advance a director from liability arising out
of a prohibited dividend or distribution to shareholders.
Under the Companies Law, a
company may indemnify an office holder for the following liabilities, payments and expenses incurred for acts
performed by him or her,
as an office holder, either pursuant to an undertaking given by the company in advance of the act or following the act, provided its
articles
of association authorize such indemnification:
●
a monetary liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award
approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such
an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities
when the undertaking to indemnify is given, and to an amount, or according to criteria, determined by the board of directors as reasonable
under the circumstances. Such undertaking shall detail the foreseen events and amount, or criteria mentioned above;
●
reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder (1) as a result of an investigation or
proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no
indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon
him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed,
it was imposed with respect to an offense that does not require proof of criminal intent (mens rea); and (2) in connection with a monetary
sanction; and
95
●
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against
him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was
acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent (mens rea).
In addition, under the Companies
Law, a company may insure an office holder against the following liabilities incurred for acts performed by him
or her as an office holder,
to the extent provided in the company’s articles of association:
●
a breach of a duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the
act would not harm the company;
●
a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;
and
●
a monetary liability imposed on the office holder in favor of a third party.
Under the Companies Law, a
company may not indemnify, exculpate or insure an office holder against any of the following:
●
a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that
the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
●
a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;
●
an act or omission committed with intent to derive illegal personal benefit; or
●
a fine or penalty levied against the office holder.
For the approval of exculpation,
indemnification and insurance of office holders who are directors, see “— Compensation of Directors,” for the
approval
of exculpation, indemnification and insurance of office holders who are not directors, see “—Compensation of Executive Officers”
and for the
approval of exculpation, indemnification and insurance of office holders who are controlling shareholders, see “—
Fiduciary Duties and Approval of
Related Party Transactions under Israeli Law — Disclosure of Personal Interests of a Controlling
Shareholder and Approval of Certain Transactions.”
Our articles of association
permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted under the Companies Law
(other than indemnification
for litigation expenses in connection with a monetary sanction); provided that we may not exculpate an office holder for an
action or
transaction in which a controlling shareholder or any other office holder (including an office holder who is not the office holder we
have
undertaken to exculpate) has a personal interest (within the meaning of the Companies Law).
We have entered into indemnification
and exculpation agreements with each of our current office holders exculpating them from a breach of their
duty of care to us to the fullest
extent permitted by the Companies Law (provided that we may not exculpate an office holder for an action or transaction in
which a controlling
shareholder or any other office holder (including an office holder who is not the office holder we have undertaken to exculpate) has a
personal interest (within the meaning of the Companies Law)) and undertaking to indemnify them to the fullest extent permitted by the
Companies Law
(other than indemnification for litigation expenses in connection with a monetary sanction), to the extent that these liabilities
are not covered by insurance.
This indemnification is limited to events determined as foreseeable by our board of directors based on our
activities, as set forth in the indemnification
agreements. Under such agreements, the maximum aggregate amount of indemnification that
we may pay to all of our office holders together is (i) for
office holders who joined our company before May 31, 2013, the greater of
30% of the shareholders equity according to our most recent financial
statements (audited or reviewed) at the time of payment and NIS
20 million, and (ii) for office holders who joined our company after May 31, 2013, 25% of
the shareholders equity according to our most
recent financial statements (audited or reviewed) at the time of payment.
We are not aware of any pending
or threatened litigation or proceeding involving any of our office holders as to which indemnification is being
sought, nor are we aware
of any pending or threatened litigation that may result in claims for indemnification by any office holder.
96
C. Board Practices
Board of Directors
Under our articles of association,
the number of directors on our board of directors (including external directors) must be no less than five and no
more than 11. Our board
of directors currently consists of nine directors, including two external directors. All of our current directors qualify as
“independent
directors” under the Nasdaq listing requirements, such that we comply with the Nasdaq Listing Rule that requires that a majority
of our board
of directors be comprised of independent directors, within the meaning of Nasdaq Listing Rules.
Other than our external
directors who are subject to special election requirements under the Companies Law, our directors are elected by the vote
of a
majority of the ordinary shares present, in person or by proxy, and voting at a shareholders’ meeting. Each director (other
than our external directors)
holds office until the first annual general meeting of shareholders following his or her appointment,
unless the tenure of such director expires earlier
pursuant to the Companies Law or unless he or she is removed from office as
described below.
Vacancies on our board of
directors, including vacancies resulting from there being fewer than the maximum number of directors permitted by our
articles of association,
may generally be filled by a vote of a simple majority of the directors then in office. See “— External Directors” for
a description of
the procedure for the election of external directors.
A general meeting of our shareholders
may remove a director (other than our external directors) from office prior to the expiration of his or her
term in office by a resolution
adopted by holders of a majority of our shares voting on the proposed removal, provided that the director being removed from
office is
given a reasonable opportunity to present his or her case before the general meeting. See “— External Directors” for
a description of the procedure
for the removal of external directors.
External Directors
Under the Companies Law, companies
incorporated under the laws of the State of Israel that are “public companies,” must appoint at least two
external directors
who meet the qualification requirements in the Companies Law.
According to regulations promulgated
under the Companies Law, a company whose shares are traded on certain stock exchanges outside Israel
(including the Nasdaq Global Select
Market, such as our company) that does not have a controlling shareholder and that complies with the requirements of
the laws of the foreign
jurisdiction where the company’s shares are listed, as they apply to domestic issuers, with respect to the appointment of independent
directors and the composition of the audit committee and compensation committee, may elect to exempt itself from the requirements of Israeli
law with
respect to the requirement to appoint external directors and related rules concerning the composition of the audit committee
and compensation committee
of the board of directors. If a company has elected to avail itself from the requirement to appoint external
directors and at the time a director is appointed all
members of the board of directors are of the same gender, a director of the other
gender must be appointed. We relied on such exemption between January
30, 2017 and until the closing of the September 2023 private placement,
as a result of which FIMI Opportunity Funds became our controlling shareholder
(within the meaning of the Companies Law), and therefore,
we ceased to be entitled to rely on the relief from external directors and are required to comply
with the Israeli law requirements relating
to the appointment of external directors and the composition of our audit committee and compensation
committee. Accordingly, in August
2023, our shareholders approved the election of Prof. Benjamin Dekel and Assaf Itshayek as external directors (within
the meaning of the
Companies Law), each to serve for an initial three-year term, effective as of September 7, 2023.
The Companies Law provides
that a person may not serve as an external director if the person is a relative (as such term is defined in the
Companies Law) of a controlling
shareholder or if, on the date of the person’s appointment or within the preceding two years, the person or his or her
relatives
(as such term is defined in the Companies Law), partners, employers or anyone to whom that person is subordinate (directly or indirectly),
or
entities under the person’s control have or had any affiliation with the company, the controlling shareholder of the company
or relative of a controlling
shareholder, at the time of the appointment, or any entity that, as of the appointment date is, or at any
time during the two years preceding that date was,
controlled by the company or by the company’s controlling shareholder (each
an “Affiliated Party”). The term “affiliation” generally includes: an
employment relationship; a business or professional
relationship maintained on a regular basis (excluding insignificant relationships); control; and service
as an office holder (excluding
service as a director in a private company prior to the first offering of its shares to the public if such director was appointed
as a
director of the private company in order to serve as an outside director following the initial public offering). Notwithstanding the foregoing,
a person
may not serve as an external director if that person or that person’s relative, partner, employer, a person to whom such
person is subordinate (directly or
indirectly) or any entity under the person’s control has a business or professional relationship
with any entity or person that has an affiliation with any
Affiliated Party, even if such relationship is intermittent (excluding insignificant
relationships). Additionally, any person who has received, during his or
her tenure as an external director, direct or indirect compensation
from the company for his or her role as a director, other than compensation permitted
under the Companies Law and the regulations promulgated
thereunder (including indemnification or exculpation, the company’s commitment to indemnify
or exculpate such person and insurance
coverage), may not continue to serve as an external director.
No person may serve as an
external director if the person’s positions or other affairs create, or may create, a conflict of interest with that person’s
responsibilities as a director, or may otherwise interfere with such person’s ability to serve as a director, or if the person is
an employee of the Israel
Securities Authority or of an Israeli stock exchange. If at the time an external director is appointed all current
members of the board of directors, who are
not the controlling shareholder or relatives of the controlling shareholder, are of the same
gender, then the external director to be appointed must be of the
other gender. In addition, a person who is a director of a company may
not be elected as an external director of another company if, at that time, a director
of the other company is acting as an external director
of the first company.
97
An external director must
meet certain professional qualifications or have financial and accounting expertise, as such terms are defined under
regulations promulgated
pursuant to the Companies Law. At least one external director must have financial and accounting expertise. The board of
directors determines
whether a director possesses financial and accounting expertise or professional qualifications. Our Board of Directors has determined
that Assaf Itshayek has financial and accounting expertise and Prof. Benjamin Dekel has the requisite professional qualifications.
External directors are elected
by shareholders by the affirmative vote of the holders of a majority of the ordinary shares represented at the meeting,
in person or by
proxy, entitled to vote and voting on the matter, provided that one of the following conditions is met: (i) the shares voting in
favor of the
election of the external director (excluding abstentions) include at least a majority of the shares voted by shareholders
who are not controlling shareholders
and shareholders who do not have a personal interest in such election (excluding a personal interest
that is not related to a relationship with a controlling
shareholder), or (ii) the total number of shares voted against the election
by shareholders referred to in clause (i) does not exceed 2% of our outstanding
voting rights.
Under Israeli law, the initial
term of an external director of an Israeli public company is three years. An external director may be re-elected,
subject to certain circumstances
and conditions, to two additional terms of three years, and as a company whose shares are listed on the TASE and a foreign
exchange, our
external directors may be elected to additional terms of three years each, subject to conditions set out in regulations promulgated under
the
Companies Law.
An
external director may be removed at a special general meeting of shareholders called by the board of directors by the same special majority
of
the shareholders required for his or her election (as detailed above) if he or she ceases to meet the statutory qualifications for
appointment or if he or she
violates his or her duty of loyalty to the company. An external director may also be removed by order of an
Israeli court if the court finds that the external
director is permanently unable to exercise his or her duties, has ceased to meet the
statutory qualifications for his or her appointment or has violated his or
her duty of loyalty to the company.
If
the vacancy of an external directorship causes a company to have fewer than two external directors, the company’s board of directors
is required
under the Companies Law to call a special general meeting of the company’s shareholders as soon as possible to appoint
such number of new external
directors so that the company thereafter has two external directors.
Each committee authorized
to exercise any of the powers of the board of directors is required to include at least one external director, and both the
audit committee
and compensation committee are required to include all of the external directors.
An external director is entitled
to compensation as provided in regulations adopted under the Companies Law and is otherwise prohibited from
receiving any other compensation,
directly or indirectly, in connection with such service.
Audit Committee
We have an audit committee
consisting of Ms. Lilach Payorski, an independent director under the Companies Law and Nasdaq Listing Rules, and
our external directors,
Mr. Assaf Itshayek and Prof. Benjamin Dekel. Mr. Assaf Itshayek serves as the chairman of the audit committee.
Under
the Companies Law, publicly traded companies must establish an audit committee. The audit committee must consist of at least three
members,
and must include all the company’s external directors, including one external director serving as chair of the audit committee;
and the majority of
the audit committee members must be “independent directors” (as such term is defined in the Companies
Law). The chairman of the board of directors,
directors employed by, or that provide services on a regular basis to, the company or to
a controlling shareholder or a company controlled by a controlling
shareholder, or a director whose main livelihood depends on a controlling
shareholder, or any controlling shareholder and any relative of a controlling
shareholder may not be a member of the audit committee.
An audit committee may not approve an action or a transaction with an officer or director, a
transaction in which an officer or director
has a personal interest, a transaction with a controlling shareholder or certain other transactions specified in the
Companies Law, unless
at the time of approval two external directors are serving as members of the audit committee and at least one of the external
directors
was present at the meeting in which approval was granted.
Under the Exchange Act and
Nasdaq listing requirements, we are required to maintain an audit committee consisting of at least three independent
directors, each of
whom is financially literate and one of whom has accounting or related financial management expertise. Our board of directors has
affirmatively
determined that each member of our audit committee qualifies as an “independent director” for purposes of serving on an audit
committee
under the Exchange Act and Nasdaq listing requirements. Our board of directors has determined that Lilach Payorski qualifies
as an “audit committee
financial expert,” as defined in Item 407(d)(5) of Regulation S-K. All members of our audit committee
meet the requirements for financial literacy under
the applicable rules and regulations of the SEC and Nasdaq.
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Audit Committee Role
Our audit committee generally
provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our
accounting, auditing,
financial reporting and internal control functions by reviewing the services of our independent accountants and reviewing their reports
regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit
efforts of our
independent accountants. Our audit committee also acts as a corporate governance compliance committee and oversees the
implementation and
amendment, from time to time, of our policies for compliance with Israeli and U.S. securities laws and applicable Nasdaq
corporate governance
requirements, including non-use of inside information, reporting requirements, our engagement with related parties,
whistleblower complaints and
protection, and is also responsible for the handling of any incidents that may arise in violation of our
policies or applicable securities laws. Our board of
directors has adopted an audit committee charter setting forth the specific responsibilities
of the audit committee consistent with the Companies Law, and
the rules and regulations of the SEC and the Nasdaq listing requirements,
which include:
●
oversight of our independent auditors and recommending the engagement, compensation or termination of engagement of our independent
auditors to the board of directors or shareholders for their approval, as applicable, in accordance with the requirements of the Companies Law;
●
pre-approval of audit and non-audit services to be provided by the independent auditors;
●
reviewing and recommending to the board of directors the approval of our
quarterly and annual financial reports; and
●
overseeing the implementation and amendment of our policies for compliance with Israeli and U.S. securities laws and applicable Nasdaq
corporate governance requirements.
Additionally, under the Companies
Law, the role of the audit committee includes: (1) determining whether there are delinquencies in the business
management practices of
our company, including in consultation with our internal auditor or our independent auditor, and making recommendations to the
board of
directors to improve such practices; (2) determining whether to approve certain related party transactions (including transactions in
which an
office holder has a personal interest) and whether any such transaction is an extraordinary or material transaction under the
Companies Law; (3)
determining whether a competitive process must be implemented for the approval of certain transactions with controlling
shareholders or in which a
controlling shareholder has a personal interest (whether or not the transaction is an extraordinary transaction),
under the supervision of the audit committee
or other party determined by the audit committee and in accordance with standards determined
by the audit committee, or whether a different process
determined by the audit committee should be implemented for the approval of such
transactions; (4) determining the process for the approval of certain
transactions with controlling shareholders that the audit committee
has determined are not extraordinary transactions but are not immaterial transactions;
(5) where the board of directors approves the work
plan of the internal auditor, examining such work plan before its submission to the board of directors
and proposing amendments thereto;
(6) examining our internal controls and internal auditor’s performance, including whether the internal auditor has
sufficient resources
and tools to dispose of its responsibilities; (7) examining the scope of our auditor’s work and compensation and submitting its
recommendation with respect thereto to the corporate body considering the appointment thereof (either the board of directors or the shareholders
at the
general meeting); and (8) establishing procedures for the handling of employees’ complaints as to the management of our business
and the protection to be
provided to such employees.
Compensation Committee
We have a compensation committee
consisting of Ms. Lilach Payorski, an independent director under the Companies Law and Nasdaq Listing
Rules, and our external directors,
Mr. Assaf Itshayek and Prof. Benjamin. Mr. Assaf Itshayek serves as the chairman of the compensation committee.
Under
the Companies Law, publicly traded companies must establish a compensation committee, including an external director serving as chair
of
the compensation committee. The compensation committee must consist of at least three members and must include all of the company’s
external directors,
who must form a majority of its members. The additional members of the compensation committee must satisfy the criteria
for remuneration applicable to
the external directors. The restrictions under the Companies Law regarding who may serve on the audit committee,
as detailed above, apply to membership
on the compensation committee.
Under Nasdaq listing requirements,
we are required to maintain a compensation committee consisting of at least two members, each of whom is an
“independent director”
under the Nasdaq listing requirements. Our board of directors has affirmatively determined that each member of our compensation
committee
qualifies as an “independent director” under the Nasdaq listing requirements.
Compensation Committee Role
In accordance with the Companies
Law, the roles of the compensation committee are, among others, as follows:
●
recommending to the board of directors with respect to the approval of the compensation policy for office holders and, once every three years,
regarding any extensions to a compensation policy that was adopted for a period of more than three years;
●
reviewing the implementation of the compensation policy and periodically recommending to the board of directors with respect to any
amendments or updates of the compensation policy;
99
●
resolving whether or not to approve arrangements with respect to the terms of office and employment of office holders; and
●
exempting, under certain circumstances, a transaction with our Chief Executive Officer from the approval of the general meeting of our
shareholders.
We rely on the “foreign
private issuer exemption” with respect to the Nasdaq requirement to have a formal charter for the compensation
committee.
Strategy Committee
Our strategy committee currently
consists of Ms. Lilach Asher-Topilsky, Mr. David Tsur and Mr. Uri Botzer. Ms. Lilach Asher-Topilsky serves as
the chair of the strategy
committee.
The roles of our strategy
committee are (among others): (1) reviewing periodically and making recommendations to the board of directors with
respect to our strategic
plan and overall strategy, our research and development plan, annual work plan and budget, strategy with respect to mergers and
acquisitions,
and any strategic initiatives identified our board of directors or management from time to time, including the exit from existing lines
of
business and entry into newlines of business, joint ventures, acquisitions, investments, dispositions of business and assets and business
expansions; (2)
guiding management in the development of our strategy, including reviewing and discussing with management our strategic
direction and initiatives and
the risks and opportunities associated with our strategy; (3) reviewing with management the process for
development, approval and modification of the
strategy and strategic plan; (4) assisting management with identifying key issues, options
and external developments impacting our strategy; (5) reviewing
management’s progress in implementing our global strategy; and (6)
ensuring the board of directors is regularly apprised of the progress with respect to
implementation of any approved strategy.
Internal Auditor
Under the Companies Law, the
board of directors of a public company must appoint an internal auditor recommended by the audit committee. The
role of the internal auditor
is, among other things, to examine whether a company’s actions comply with applicable law and orderly business procedure.
Under
the Companies Law, the internal auditor may not be an “interested party” or an office holder, or a relative of an interested
party or of an office
holder, nor may the internal auditor be the company’s independent accounting firm or anyone acting on its
behalf. An “interested party” is defined in the
Companies Law as (i) a holder of 5% or more of the company’s outstanding
shares or voting rights, (ii) any person or entity (or relative of such person)
who has the right to designate one or more directors or
to designate the chief executive officer of the company, or (iii) any person who serves as a director
or as a chief executive officer
of the company. Tali Yaron of Brightman Almagor Zohar & Co. (a Firm in the Deloitte Global Network) serves as our
internal auditor.
Fiduciary Duties and Approval of Related Party
Transactions under Israeli Law
Fiduciary Duties of Office Holders
The Companies Law codifies
the fiduciary duties that office holders owe to a company. Each person listed in the table under “Management —
Executive Officers
and Directors” is an office holder under the Companies Law.
An office holder’s fiduciary
duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of
care with
which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care includes, among
other
things, a duty to use reasonable means, in light of the circumstances, to obtain:
●
information on the advisability of a given action brought for his or her approval or performed by the director in his or her capacity as a
director; and
●
all other important information pertaining to such action.
The duty of loyalty requires
an office holder to act in good faith and for the benefit of the company, and includes, among other things, the duty to:
●
refrain from any act involving a conflict of interests between the performance of his or her duties to the company and his or her other duties or
personal affairs;
●
refrain from any activity that is competitive with the business of the company;
●
refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and
●
disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or
her position as an office holder.
We
may approve an act specified above which would otherwise constitute a breach of the office holder’s duty of loyalty provided that
the office
holder acted in good faith, the act or its approval does not harm the company and the office holder discloses his or her personal
interest a sufficient amount
of time before the date for discussion of approval of such act.
100
Disclosure of Personal Interests of an Office
Holder and Approval of Transactions
The Companies Law requires
that an office holder promptly disclose to the company any “personal interest” that he or she may have, and all
related material
information or documents relating to any existing or proposed transaction by the company. A “personal interest” is defined
under the
Companies Law as the personal interest of a person in an action or in a transaction of the company, including the personal interest
of such person’s relative
or of any other corporate entity in which such person and/or such person’s relative is a director,
general manager or chief executive officer, a holder of 5%
or more of the outstanding shares or voting rights, or has the right to appoint
at least one director or the general manager, but excluding a personal interest
arising solely from ownership of shares in the company.
A personal interest includes the personal interest of a person for whom the office holder holds a
voting proxy and the personal interest
of a person voting as a proxy, even when the person granting such proxy has no personal interest. An interested
office holder’s
disclosure must be made promptly and no later than the first meeting of the board of directors at which the transaction is considered.
An
office holder is not obliged to disclose such information if the personal interest of the office holder derives solely from the personal
interest of his or her
relative in a transaction that is not considered as an “extraordinary transaction.”
An “extraordinary transaction”
is defined under the Companies Law as any of the following:
●
a transaction other than in the ordinary course of business;
●
a transaction that is not on market terms; or
●
a transaction that is likely to have a material impact on the company’s profitability, assets or liabilities.
Under the Companies Law, unless
the articles of association of a company provide otherwise, a transaction with an office holder or with a third
party in which the office
holder has a personal interest, and which is not an extraordinary transaction, requires approval by the board of directors. Our
articles
of association do not provide for a different method of approval. If the transaction is an extraordinary transaction with an office holder
or third party
in which the office holder has a personal interest, then audit committee approval is required prior to approval by the
board of directors. The audit
committee determines whether any such transaction is an “extraordinary transaction” (within
the meaning of the Companies Law). For the approval of
compensation arrangements with directors and officers who are controlling shareholders,
see “— Disclosures of Personal Interests of a Controlling
Shareholder and Approval of Certain Transactions,” for the
approval of compensation arrangements with directors, see “— Compensation of Directors”
and for the approval of compensation
arrangements with office holders who are not directors, see “— Compensation of Executive Officers.”
Subject to certain exceptions,
any person who has a personal interest in the approval of a transaction that is brought before a meeting of the board
of directors or
the audit committee may not be present at the meeting, unless such person is an office holder and invited by the chairman of the board
of
directors or of the audit committee, as applicable, to present the matter being considered, and may not vote on the matter. In addition,
a director who has a
personal interest in the approval of a transaction may be present at the meeting and vote on the matter if a majority
of the directors or members of the audit
committee, as applicable, have a personal interest in the transaction. In such case, shareholder
approval is also required.
Disclosure of Personal Interests of a Controlling
Shareholder and Approval of Certain Transactions
Pursuant to the Companies
Law, the disclosure requirements regarding personal interests that apply to office holders also apply to a controlling
shareholder of
a public company. For this purpose, a controlling shareholder is a shareholder who has the ability to direct the activities of a company,
including a shareholder who owns 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights. Two
or more
shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.
Extraordinary transactions
with a controlling shareholder or in which a controlling shareholder has a personal interest, the terms of services
provided by a controlling
shareholder or his or her relative, directly or indirectly (including through a corporation controlled by a controlling shareholder),
the terms of employment of a controlling shareholder or his or her relative who is employed by the company and who is not an office holder
and the terms
of service and employment, including exculpation, indemnification or insurance, of a controlling shareholder or his or her
relative who is an office holder,
require the approval of each of the audit committee or the compensation committee with respect to terms
of service and employment by the company as an
office holder, employee or service provider, the board of directors and the shareholders,
in that order. In addition, the shareholder approval must fulfill one
of the following requirements:
●
at least a majority of the shares held by shareholders who have no personal interest in the transaction and who are present and voting at the
meeting on the matter are voted in favor of approving the transaction, excluding abstentions; or
●
the shares voted against the transaction by shareholders who have no personal interest in the transaction who are present and voting at the
meeting represent no more than 2% of the voting rights in the company.
101
Each shareholder voting on
the approval of an extraordinary transaction with a controlling shareholder must inform the company prior to voting
whether or not he
or she has a personal interest in the approval of the transaction, otherwise, the shareholder is not eligible to vote on the proposal
and his
or her vote will not be counted for purposes of the proposal.
Any extraordinary transaction
with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than
three years requires
approval every three years, unless the audit committee determines that the duration of the transaction is reasonable given the
circumstances
related thereto.
Pursuant to regulations promulgated
under the Companies Law, certain transactions with a controlling shareholder or his or her relative, or with
directors, relating to terms
of service or employment, that would otherwise require approval of the shareholders may be exempt from shareholder approval
upon certain
determinations of the audit committee and board of directors.
Duties of Shareholders
Under the Companies Law, a
shareholder has a duty to refrain from abusing his or her power in the company and to act in good faith and in a
customary manner in exercising
its rights and performing its obligations to the company and other shareholders, including, among other things, when
voting at meetings
of shareholders on the following matters:
●
an amendment to the company’s articles of association;
●
an increase in the company’s authorized share capital;
●
a merger; and
●
the approval of related party transactions and acts of office holders that require shareholder approval.
A shareholder also has a general
duty to refrain from discriminating against other shareholders.
In addition, certain shareholders
have a duty to act with fairness towards the company. These shareholders include any controlling shareholder,
any shareholder who knows
that his or her vote can determine the outcome of a shareholder vote, and any shareholder that, under a company’s articles of
association,
has the power to appoint or prevent the appointment of an office holder or has another power with respect to the company. The Companies
Law
does not define the substance of this duty except to state that the remedies generally available upon a breach of contract will also
apply in the event of a
breach of the duty to act with fairness.
Approval of Significant Private Placements
Under the Companies Law, a
significant private placement of securities requires approval by the board of directors and the shareholders by a
simple majority. A private
placement is considered a significant private placement if it will cause a person to become a controlling shareholder or if all of
the
following conditions are met:
●
the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance;
●
some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and
●
the transaction will increase the relative holdings of a shareholder who holds 5% or more of the company’s outstanding share capital or voting
rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share
capital or voting rights.
D. Employees
Set forth below is a chart
showing the number of people we employed at the times indicated:
As of December 31,
2024
2023
2022
Total Employees
420
378
379
Located in Israel
374
347
360
Located in the United States
44
29
17
Located in Other Countries
2
2
2
In Research and Development
42
38
37
In General and Administrative
62
57
52
In Operations
278
249
259
In Sales and Marketing
38
34
31
102
We signed a collective bargaining
agreement with the Histadrut (General Federation of Labor in Israel) and the employees’ committee established
by our employees at
our Beit Kama facility in December 2013, which expired in December 2017. In November 2018, we signed a further collective
bargaining agreement
with the employees’ committee and the Histadrut, which expired in December 2021. In July 2022, we signed a new collective
agreement
with the employee’s committee and the Histadrut; while the agreement will be effective through the end of 2029, certain economic terms
may be
renegotiated by the parties following the four-year anniversary of the agreement. The collective bargaining agreement governs certain
aspects of our
employee-employer relations, such as: firing procedures, annual salary raise, and eligibility for certain compensation
terms and welfare. Approximately 281
of our employees, all of whom are located at our Beit Kama facility, currently work under the collective
bargaining agreement signed in July 2022. We
have experienced labor disputes and work stoppages in the past at our Beit Kama facility.
For example, on March 3, 2022, during the course our
negotiations with the Histadrut and the employees’ committee on the renewal
of the collective bargaining agreement, the employee’s committee declared a
labor dispute, and on April 26, 2022, a strike was initiated
by the employees’ committee, which continued until signed agreement was signed in July 2022,
at which time the unionized employees
returned to work at the Beit Kama facility. In addition, in December 2020, during the course of our negotiations
with the Histadrut and
the employees’ committee on severance remuneration for employees who may be laid-off as part of the workforce down-sizing as a
result
of the transfer of GLASSIA manufacturing to Takeda, the employee’s committee declared a labor dispute, which was subsequently concluded
during
February 2021 following the execution of a special collective bargaining agreement governing such severance terms. In March 2023,
we entered into an
additional special collective bargaining agreement with the employees’ committee and the Histadtrut governing
severance remuneration terms for
employees who may be laid-off in connection with the potential staff reductions, when needed, in order
to adjust to lower plant utilization.
In regard to our Israeli employees,
Israeli labor laws govern the length of the workday, minimum wages for employees, procedures for hiring and
dismissing employees, determination
of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-
discrimination laws
and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the retirement,
death
or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute, which is similar
to the U.S.
Social Security Administration. Our employees have defined benefit pension plans that comply with the applicable Israeli legal
requirements.
Extension orders issued by
the Ministry of Labor, Social Affairs, and Social Services apply to us and affect matters such as cost of living
adjustments to payroll,
length of working hours and week, recuperation pay, travel expenses, and pension rights.
E. Share Ownership
The following table sets forth
information with respect to the beneficial ownership of our ordinary shares by each of our directors and executive
officers and all of
current directors and executive officers as a group.
The percentage of beneficial
ownership of our ordinary shares is based on 57,505,031 ordinary shares outstanding as of March 5, 2025. Beneficial
ownership is determined
in accordance with the rules of the SEC and generally includes voting power or investment power with respect to securities. All
ordinary
shares subject to options exercisable into ordinary shares and restricted share units that will become vested, as applicable, within 60
days of the
date of the table are deemed to be outstanding and beneficially owned by the shareholder holding such options and restricted
share units for the purpose of
computing the number of shares beneficially owned by such shareholder. They are not, however, deemed to
be outstanding and beneficially owned for the
purpose of computing the percentage ownership of any other shareholder.
Ordinary Shares
Beneficially Owned
Name
Number
Percentage
Executive Officers
Amir London (1)
441,875
*
Chaime Orlev (2)
112,833
*
Eran Nir (3)
89,098
*
Yael Brenner (4)
62,466
*
Hanni Neheman (5)
52,042
*
Nir Livneh (6)
20,000
*
Orit Pinchuk (7)
68,333
*
Liron Reshef (8)
20,000
*
Jon Knight (9)
45,000
*
Shavit Beladev (10)
52,043
*
Boris Gorelik (11)
45,000
*
Directors
Lilach Asher-Topilsky (12)
41,500
*
Uri Botzer (13)
15,000
*
Ishay Davidi (14)
22,125,787
38.48%
Prof. Benjamin Dekel (15)
4,000
*
Karnit Goldwasser (16)
41,500
*
Assaf Itshayek (17)
4,000
*
Lilach Payorski (18)
15,000
*
Leon Recanati (19)
3,489,437
6.07%
David Tsur (20)
664,429
1.16%
Directors and executive officers as a group (20 persons) (21)
27,409,343
47.64%
*
Less than 1% of our ordinary shares.
(1)
Includes (i) 61,875 ordinary shares, and (ii) options to purchase
380,000 ordinary shares exercisable within 60 days of the date of the table, at a
weighted average exercise price of NIS 19.72 (or
$5.54) per share, which expire between June 20, 2025, and June 22, 2029. Does not include
unvested options to purchase 200,000
ordinary shares that are not exercisable within 60 days of the date of the table.
103
(2)
Includes (i) 11,633 ordinary shares, and (ii) options to purchase 101,200 ordinary shares exercisable within 60 days of the date of the table, at a
weighted average exercise price of NIS 19.60 (or $5.50) per share, which expire between December 20, 2025, and November 28, 2029. Does not
include unvested options to purchase 90,000 ordinary shares units that are not exercisable within 60 days of the date of the table.
(3)
Includes (i) 10,398 ordinary shares, and (ii) options to purchase 78,700 ordinary shares exercisable within 60 days of the date of the table, at a
weighted average exercise price of NIS 19.638 (or $5.51) per share, which expire between December 20, 2025 and August 28, 2028. Does not
include unvested options to purchase 22,500 ordinary shares that are not exercisable within 60 days of the date of the table.
(4)
Includes (i) 6,266 ordinary shares, and (ii) options to purchase 56,200 ordinary shares exercisable within 60 days of the date of the table, at exercise
price of NIS 19.75 (or $5.54) per share, which expire between December 20, 2025, and August 28, 2028. Does not include unvested options to
purchase 15,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(5)
Includes (i) 3,417 ordinary shares, and (ii) options to purchase
48,625 ordinary shares exercisable within 60 days of the date of the table, at a
weighted average exercise price of NIS 19.42 (or
$5.45) per share, which expire between December 20, 2025, and August 28, 2028. Does not include
unvested options to purchase 15,000
ordinary shares that are not exercisable within 60 days of the date of the table.
(6)
Subject to options to purchase 20,000 ordinary shares exercisable within 60 days of the date of the table, at a weighted average exercise price of NIS
17.67 (or $4.96) per share, which expire on October 23, 2029. Does not include unvested options to purchase 20,000 ordinary shares that are not
exercisable within 60 days of the date of the table.
(7)
Includes (i) 12,133 ordinary shares, and (ii) options to purchase 56,200 ordinary shares exercisable within days of the date of the table, at an exercise
price of NIS 19.75 (or $5.54) per share, which expire between December 20, 2025, and August 28, 2028. Does not include unvested options to
purchase 15,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(8)
Includes options to purchase 20,000 ordinary shares exercisable within 60 days of the date of the table, at a weighted average exercise price of NIS
16.75 (or $4.70) per share, which expire on September 2, 2029. Does not include unvested options to purchase 20,000 ordinary shares that are not
exercisable within 60 days of the date of the table.
(9)
Subject to options to purchase 45,000 ordinary shares exercisable within 60 days of the date of the table, at an exercise price of $5.88 per share,
which expire on September 9, 2028. Does not include unvested options to purchase 15,000 ordinary shares that are not exercisable within 60 days of
the date of the table.
(10)
Includes (i) 3,418 ordinary shares, and (ii) options to purchase 48,625 ordinary shares exercisable within 60 days of the date of the table, at a
weighted average exercise price of NIS 19.42 (or $5.45) per share, which expire between December 20, 2025, and August 28, 2028. Does not include
unvested options to purchase 15,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(11)
Includes options to purchase 45,000 ordinary shares exercisable within 60 days of the date of the table, at a weighted average exercise price of $5.04
per share, which expire between February 11, 2027, and January 16, 2029. Does not include unvested options to purchase 30,000 ordinary shares
units that are not exercisable or do no vest, as applicable, within 60 days of the date of the table.
(12)
Subject to options to purchase 41,500 ordinary shares that are currently exercisable or exercisable within 60 days of the date of the table, at an
exercise price of NIS 22.11 (or $6.21) per share, which expire between September 25, 2026, and June 22, 2029. Does not include unvested options to
purchase 15,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(13)
Subject to options to purchase 15,000 ordinary shares that are currently exercisable or exercisable within 60 days of the date of the table, at an
exercise price of NIS 17.35 (or $4.87) per share, which expire on June 22, 2029. Does not include unvested options to purchase 15,000 ordinary
shares that are not exercisable within 60 days of the date of the table.
(14)
Includes (i) 22,084,287 shares indirectly beneficially owned through the FIMI 6 Funds and FIMI 7 Funds. and (ii) 41,500 ordinary shares subject to
options held directly held by Mr. Ishay Davidi that are currently exercisable or exercisable within 60 days of the date of the table, at a weighted
average exercise price of NIS 22.11 (or $6.21) per share, which expire between September 25, 2026, and June 22, 2029. Does not include unvested
options to purchase 15,000 ordinary shares held by Mr. Ishay Davidi that are not exercisable within 60 days of the date of the table.
(15)
Subject to options to purchase 4,000 ordinary shares that are currently exercisable or exercisable within 60 days of the date of the table, at an exercise
price of NIS 19.71 (or $5.53) per share, which expire on March 7, 2030. Does not include ordinary shares subject to unvested options to purchase
12,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(16)
Subject to options to purchase 41,500 ordinary shares that are currently exercisable or exercisable within 60 days of the date of the table, at a
weighted average exercise price of NIS 22.11 (or $6.21) per share, which expire between September 25, 2026, and June 22, 2029. Does not include
unvested options to purchase 15,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(17)
Subject to options to purchase 4,000 ordinary shares that are currently exercisable or exercisable within 60 days of the date of the table, at an exercise
price of NIS 19.71 (or $5.53) per share, which expire on March 7, 2030. Does not include ordinary shares subject to unvested options to purchase
12,000 ordinary shares that are not exercisable within 60 days of the date of the table.
(18)
Subject to options to purchase 15,000 ordinary shares that are currently exercisable or exercisable within 60 days of the date of the table, at an
exercise price of NIS 19.36 (or $5.43) per share, which expire on June 22, 2029. Does not include unvested options to purchase 15,000 ordinary
shares that are not exercisable within 60 days of the date of the table.
(19)
Mr. Recanati (i) directly holds 631,145 ordinary shares and (ii)
beneficially owns 1,455,457 ordinary shares through Gov Financial Holdings Ltd.
(“Gov”) and 1,346,335 ordinary shares through
Insight Capital Ltd. (“Insight”), both of which are wholly owned by Mr. Recanati. In addition,
includes options to purchase
56,500 ordinary shares directly held by Mr. Recanati that are currently exercisable or exercisable within 60 days of the
date
of the table, at a weighted average exercise price of NIS 21.91 (or $6.15) per share, which expire between June 20, 2025, and June 22,
2029.
Does not include ordinary shares subject to unvested options to purchase 15,000 ordinary shares that are not exercisable within
60 days of the date of
the table.
(20)
Mr. David Tsur directly holds 607,929 ordinary shares. In addition, includes options to purchase 56,500 ordinary shares directly held by Mr. Tsur that
are currently exercisable or exercisable within 60 days of the date of the table, at a weighted average exercise price of NIS 21.91 (or $6.15) per share,
which expire between June 20, 2025, and June 22, 2029. Does not include unvested options to purchase 15,000 ordinary shares that are not
exercisable within 60 days of the date of the table.
(21)
See footnotes (1)-(20) for certain information regarding beneficial ownership.
104
Equity Compensation Plan
In July 2011, we adopted our
2011 Israeli Share Option Plan and in September 2016, we amended and renamed it as the 2011 Israeli Share Award
Plan (the “2011
Plan”). The 2011 Plan expired in July 2021 and in August 2021, we extended the 2011 Plan by an additional ten years, until August
9,
2031, and adopted a few additional amendments to the 2011 Plan and the 2011 Plan was further amended in October 2022. References below
to the “2011
Plan” refer to the 2011 Plan as amended in August 2021 and October 2022. Under the 2011 Plan, we are authorized
to grant options and restricted share
units to directors, officers, employees, consultants and service providers of our company and subsidiaries.
The 2011 Plan is intended to enhance our ability
to attract and retain desirable individuals by increasing their ownership interests in
us. The 2011 Plan is designed to reflect the provisions of the Israeli
Income Tax Ordinance [New Version], 1961 (the (“Israeli Income
Tax Ordinance”), which affords certain tax advantages to Israeli employees, officers and
directors that are granted equity awards
(including options and restricted stock units) in accordance with its terms. The 2011 Plan may be administered by
our board of directors
either directly or upon the recommendation of the compensation committee.
In February 2022, the Board
of Directors adopted the U.S. Taxpayer Appendix to the 2011 Plan (the “US Appendix”), which provides for the grant
of options
and restricted shares to persons who are subject to U.S. federal income tax. The Appendix provides for the grant to U.S. employees of
options
that qualify as incentive stock options (“ISOs”) under the U.S. Internal Revenue Code of 1986, as amended. The aggregate
maximum number of ordinary
shares that may be issued upon the exercise of ISOs granted under the 2011 Plan is 500,000. The grant of ISO’s
was subject to the approval of the
Appendix by our shareholders within 12 months of its approval by our Board of Directors. The US Appendix
was approved by our shareholders at the
annual general meeting held in December 2022.
We have granted options to
our employees, officers and directors under the 2011 Plan. Each option granted under the 2011 Plan entitles the
grantee to purchase one
of our ordinary shares. In general, the exercise price of options granted to directors and officers under the 2011 Plan prior to
January
1, 2020, is generally equal to the higher of (i) the average closing price of our ordinary shares on the TASE during the 30-TASE trading
days
immediately prior to board approval of the grant of such options plus 5%; and (ii) the closing price of our ordinary shares on the
TASE on the date of the
approval of the grant of options. The exercise price of options granted to directors and officers under the 2011
Plan following January 1, 2020 is generally
equal to the higher of (i) the average closing price of our ordinary shares on the TASE during
the 30-TASE trading days immediately prior to board
approval of the grant of such options; and (ii) the closing price of our ordinary
shares on the TASE on the date of the approval of the grant of options.
Options granted under the 2011 Plan are exercised by way of net
exercise and accordingly, the grantee is not required to pay the exercise price when
exercising the options and instead, receives, upon
exercise and sale of such number of ordinary shares, an amount which is equal to the difference between
the total market value of the
ordinary shares on the date of exercise and sale underlying the exercised options and the total exercise price for such options.
The actual
number of shares issued pursuant to the net exercise of the options is equal to the number of shares subject to the option less the number
of
shares tendered back to the company to pay the exercise price.
Options granted under the 2011 Plan generally vest in four equal installments,
25% each on each of the four anniversaries of the date of grant.
Options granted under the 2011 Plan are generally exercisable for 6.5
years following the date of grant (unless the expiration date of the options is within a
blackout period, in which case the expiration
date is extended until the date that is five trading days following the expiration of the blackout period) and all
unexercised options
will expire immediately thereafter. Options that have vested prior to the end of a grantee’s employment or services agreement with
us
may generally be exercised within 90 days from the end of such grantee’s employment or services with us, unless such relationship
was terminated for
cause. Options which are not exercised during such 90-day period expire at the end of the period, unless upon termination
of such 90-day period there is an
ongoing black-out period during which time the options may not be exercised, in which case our Chief
Executive Officer or Chief Financial Officer is
entitled to extend the exercise period for specified limited periods. Options that have
not vested on the date of the end of a grantee’s employment or
services agreement with us, and, in the event of termination of employment
or services for cause, all unexercised options (whether vested or not), expire
immediately upon termination.
We previously granted restricted
share units to our officers and several of our employees under the 2011 Plan, which vested over a period of four
years in 13 installments:
25% of the restricted share units vest on the first anniversary of the grant date and 6.25% of the remaining restricted share units
vest
at the end of each quarter thereafter.
In the event of certain transactions,
such as our being acquired, or a merger or reorganization or a sale of all or substantially all of our shares or
assets, the board or
compensation committee may take one of the following actions: (i) provide that awards then outstanding under the 2011 Plan shall be
assumed
or substituted for shares or other securities of the surviving or acquiring entity, under such terms and conditions determined by the
board or the
compensation committee; (ii) provide for the acceleration of vesting of all a part of any awards then outstanding under the
2011 Plan, under such terms and
conditions as the Board or the compensation committee shall determine; or (iii) provide for the cancellation
of any award without any consideration, if the
fair market value per share on the date of the transaction does not exceed the purchase
price of any such award or if such award would not otherwise be
exercisable or vested, even in the event that the fair market value per
share on the date of the transaction, exceeds the purchase price of any such award.
The board or the compensation committee may determine
that the terms of certain awards under the 2011 Plan include a provision that their vesting
schedules will be accelerated such that they
will be exercisable prior to the closing of such a transaction, if the awards are not assumed or substituted by the
successor company.
105
Options and restricted share
units granted under the 2011 Plan to our Israeli directors, officers and employees who are not controlling shareholders
(within the meaning
of Israeli tax law) are granted pursuant to the provisions of Section 102 of the Israeli Income Tax Ordinance, under the capital gains
alternative. In order to comply with the capital gains alternative, all such options and restricted share units under the 2011 Plan are
granted or issued to a
trustee and are to be held by the trustee for at least two years from the date of grant. Under the capital gains
alternative, we are not allowed an Israeli tax
deduction for the grant of the options or issuance of the shares issuable thereunder.
As of December 31, 2024,
an aggregate of 1,164,820 ordinary shares were reserved for future issuance under the 2011 Plan (subject to certain
adjustments specified
in the 2011 Plan), and options to purchase 2,818,071 ordinary shares were outstanding under the 2011 Plan, of which options to
purchase
1,631,782 ordinary shares were vested as of such date. Any ordinary shares underlying options that expire prior to exercise that are
forfeited under
the 2011 Plan will become again available for issuance under the 2011 Plan.
F. Disclosure of a Registrant’s Action
to Recover Erroneously Awarded Compensation
There was no erroneously awarded
compensation that was required to be recovered pursuant to the Kamada Ltd. Recoupment Policy during the
fiscal year ended December 31,
2024.
Item 7. Major Shareholders and Related Party
Transactions
A. Major Shareholders
The following table sets forth
information with respect to the beneficial ownership of our ordinary shares by each person known to us to own
beneficially more than 5%
of our ordinary shares.
The percentage of beneficial
ownership of our ordinary shares is based on 57,505,031 ordinary shares outstanding as of March 1, 2025. Beneficial
ownership is determined
in accordance with the rules of the SEC and generally includes voting power or investment power with respect to securities. All
ordinary
shares subject to options exercisable into ordinary shares within 60 days of the date of the table are deemed to be outstanding and beneficially
owned by the shareholder holding such options for the purpose of computing the number of shares beneficially owned by such shareholder.
Such shares are
also deemed outstanding for purposes of computing the percentage ownership of the person holding the options. They are
not, however, deemed to be
outstanding and beneficially owned for the purpose of computing the percentage ownership of any other shareholder.
Except as described in the
footnotes below, we believe each shareholder has voting and investment power with respect to the ordinary shares
indicated in the table
as beneficially owned.
Name
Number
Percentage
FIMI Funds(1)
22,084,287
38.4%
Phoenix Financial Ltd.(2)
4,242,018
7.38%
Leon Recanati(3)
3,489,437
6.07%
(1) Based solely upon, and qualified in its entirety with reference to, Amendment No. 3 to Schedule 13D filed with the SEC on September 7, 2023.
According to the Statement, (A) (i) includes 4,421,909 shares directly owned by FIMI Opportunity Fund 6, L.P. and 5,030,799 shares directly owned
by FIMI Israel Opportunity Fund 6, Limited Partnership (together, the “FIMI 6 Funds”) and (ii) the 9,452,708 ordinary shares held by the FIMI 6
Funds are indirectly beneficially owned by FIMI 6 2016 Ltd. (“FIMI 6”), which serves as the managing general partner of the FIMI 6 Funds, and Or
Adiv Ltd., a company controlled by Mr. Ishay Davidi, which controls FIMI 6; (B) (i) includes 4,911,158 shares directly owned by FIMI Opportunity 7,
L.P. and 7,720,421 shares directly owned by FIMI Israel Opportunity Fund 7, Limited Partnership (together, the “FIMI 7 Funds”) and (ii) the
12,631,579 ordinary shares held by the FIMI 7 Funds are indirectly beneficially owned by FIMI 7 2016 Ltd. (“FIMI 7”), which serves as the managing
general partner of the FIMI 7 Funds, and O.D.N Seven Investments Ltd., a company controlled by Mr. Ishay Davidi, which controls FIMI 7; and (C)
the 22,084,287 ordinary shares held by the FIMI 6 Funds and the FIMI 7 Funds are indirectly beneficially owned by Mr. Ishay Davidi. Information
included in this footnote does not include 34,000 ordinary shares subject to options held directly by Mr. Ishay Davidi that are currently exercisable or
exercisable within 60 days of the date of the table See Footnote (14) to the table under “Item 6. Directors, Senior Management and Employees —
Share Ownership.”
(2) Based solely upon, and qualified in its entirety with reference to,
a notice dated January 2, 2025, submitted to the Company, reporting its holdings as of
December 31, 2024. According to Amendment No.
17 to Schedule 13G filed with the SEC on November 14, 2024, the securities are beneficially
owned by various direct or indirect, majority
or wholly-owned subsidiaries of Phoenix Financial Ltd., each of which operates under independent
management and makes its own independent
voting and investment decisions.
(3) Mr. Recanati (i) directly holds 631,145 ordinary shares and (ii)
beneficially owns 1,455,457 ordinary shares through Gov and 1,346,335 ordinary
shares through Insight, both of which are wholly owned
by Mr. Recanati. In addition, includes options to purchase 56,500 ordinary shares directly held
by Mr. Recanati that are exercisable
within 60 days of the date of the table, at a weighted average exercise price of NIS 21.91 (or $6.15) per share,
which expire between
June 20, 2025, and June 22, 2029. Does not include ordinary shares subject to unvested options to purchase 15,000 ordinary
shares
that are not exercisable within 60 days of the date of the table.
106
To our knowledge, based on
information provided to us by our transfer agent in the United States, as of February 27, 2025, we had one
shareholder of record registered
with an address in the United States, holding approximately 17.83% of our outstanding ordinary shares. Such number is
not representative
of the portion of our shares held in the United States nor is it representative of the number of beneficial holders residing in the United
States, since such ordinary shares were held of record by one U.S. nominee company, CEDE & Co.
To our knowledge, other than
as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant
change in the percentage
ownership held by any major shareholder since January 1, 2022.
None of our shareholders has
different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date,
result in a change
of control of our company.
B. Related Party Transactions
Directors and Executive Officers Agreements
and Arrangements
Exculpation, Indemnification
and Insurance. We have entered into indemnification and exculpation agreements with each of our current officers
and directors,
exculpating them from a breach of their duty of care to us to the fullest extent permitted by the Companies Law (provided that we may
not
exculpate an office holder for an action or transaction in which a controlling shareholder or any other office holder (including an
office holder who is not
the office holder we have undertaken to exculpate) has a personal interest (within the meaning of the Companies
Law)) and undertaking to indemnify them
to the fullest extent permitted by the Companies Law (other than indemnification for litigation
expenses in connection with a monetary sanction), including
with respect to liabilities resulting from our initial public offering in
the United States, to the extent such liabilities are not covered by insurance. Our office
holders are covered by a directors and officers’
liability insurance policy. See “Item 6. Directors, Senior Management and Employees — Exculpation,
Insurance and Indemnification
of Office Holders.”
Employment Agreements.
We have entered into employment agreements with our executive officers, which are terminable by either party for any
reason. The employment
agreements contain standard provisions, including confidentiality of information and assignment of invention provisions and non-
competition
clauses. See “Item 6. Directors, Senior Management and Employees — Compensation.”
Equity Awards.
From time to time, we grant options to our officers and directors and, in the past, granted restricted share units to our officers. For
details regarding the beneficial ownership of our shares by our officers and directors, see “Item 6. Directors, Senior Management
and Employees — Share
Ownership.”
FIMI Funds
FIMI Private Placements
On January 20, 2020, we entered
into a share purchase agreement with the FIMI Funds to purchase, in a private placement, an aggregate of
4,166,667 ordinary shares at
a price of $6.00 per share, for an aggregate $25 million gross proceeds. Concurrently, we entered into a registration rights
agreement
with the FIMI Funds, pursuant to which the FIMI Funds are entitled to customary demand registration rights (effective six months following
the
closing of the transaction) and piggyback registration rights with respect to our shares held by them. Upon the closing of the private
placement, the
beneficial ownership of the FIMI Funds increased from approximately 12.2% to 21.1% of our outstanding ordinary shares.
On May 23, 2023, we entered
into a share purchase agreement with the FIMI Funds to purchase, in a private placement, an aggregate 12,631,579
ordinary shares at a
price of $4.75 per share, for an aggregate $60 million gross proceeds. The private placement was approved by our shareholders on
August
29, 2023, in accordance with Israeli law. Upon the closing of the private placement on September 7, 2023, the beneficial ownership of
the FIMI
Funds increased from approximately 21.1% to 38.4% of our outstanding ordinary shares and the FIMI Opportunity Funds became our
controlling
shareholder, within the meaning of the Companies Law. Concurrently with the execution of the share purchase agreement, we
entered into an amended and
restated registration rights agreement with the FIMI Funds pursuant to which, among other things, we undertook
to file with the SEC a registration
statement registering the resale of all of the ordinary shares held by the FIMI Funds, per its request,
at any time commencing six months following the
closing of the private placement.
107
Lilach Asher-Topilsky, the
Chairman of our board of directors, Ishay Davidi and Uri Botzer, members of our board of directors, are partners of the
FIMI Funds. For
details regarding the beneficial ownership of the FIMI Funds and Messrs. Davidi and Botzer and Ms. Asher Topilsky see “Item 7. Major
Shareholders and Related Party Transactions — Major Shareholders” and “Item 6. Directors, Senior Management and Employees
— Share Ownership.”
Shareholders’ Agreement
Under a shareholders’
agreement entered into on March 4, 2013, the Recanati Group, on the one hand, and the Damar Group, on the other hand,
have each agreed
to vote the ordinary shares beneficially owned by them in favor of the election of director nominees designated by the other group as
follows: (i) three director nominees, so long as the other group beneficially owns at least 7.5% of our outstanding share capital, (ii)
two director nominees,
so long as the other group beneficially owns at least 5.0% (but less than 7.5%) of our outstanding share capital,
and (iii) one director nominee, so long as
the other group beneficially owns at least 2.5% (but less than 5.0%) of our outstanding share
capital. In addition, to the extent that after the designation of
the foregoing director nominees there are additional director vacancies,
each of the Recanati Group and Damar Group have agreed to vote the ordinary
shares beneficially owned by them in favor of such additional
director nominees designated by the party who beneficially owns the larger voting rights in
our company.
Engagements with Suppliers
and Service Providers Affiliated with the FIMI Funds
We have entered into certain
agreements in the ordinary course of our business for the purchase of certain products and services (such as security
services, computing
and information systems services, office equipment and recycling services) from entities controlled by or affiliated with the FIMI
Funds,
most of which were originally entered into prior to the FIMI Funds becoming a shareholder of our company and on an arm’s length
basis, and one
of which was subsequently amended and extended following the FIMI Funds becoming our controlling shareholder. These agreements
include customary
terms and conditions as applicable to the type of supplied product or services.
Item 8. Financial Information
Consolidated Financial Statements
Consolidated financial statements
are set forth under Item 18.
Legal Proceedings
In May 2022, we terminated
a distribution agreement with a third-party engaged to distribute our Propriety Products in Russia and Ukraine (the
“Distributor”)
and a power of attorney granted in connection with such distribution agreement to an affiliate of the Distributor (the “Affiliate”).
On June 13,
2023, the Affiliate filed its Statement of Claim with the tribunal of first instance in Geneva, seeking alleged damages in
the total amount of $6.7 million.
We have filed a motion with the tribunal of first instance in Geneva challenging its jurisdiction over
the Affiliate’s claims, submitting that such claims
should have been brought before an arbitral tribunal, as contractually agreed
between the parties. During December 2024 we were advised by the tribunal
of first instance in Geneva that it possesses all the necessary
information to decide on its jurisdiction and its decision is expected in the coming months.
Until the tribunal of first instance in Geneva
rules on the motion, the Affiliate’s claims will not be heard. No final decision has been made to date. At this
time, it is not
possible to assess the prospects of the claim against us and any potential liabilities and impact on our business.
In addition to the above,
we are subject to various claims and legal actions during the ordinary course of our business. We believe that there are
currently no
claims or legal actions that would have a material adverse effect on our financial position, operations or potential performance.
Dividend Policy
While we have historically retained our earnings to finance operations
and expand our business, on March 5, 2025, we announced a special cash
dividend of $0.20 per share (approximately $11.5 million in the
aggregate), with a record date (ex-dividend date) of March 17, 2025, which will be paid on
April 7, 2025. We have not determined whether
we will continue to make distributions in the future or refrain from similar distributions. Any determination
to pay dividends in the
future will be at the discretion of our board of directors and will depend on a number of factors, including our financial condition,
operating results, capital requirements, and other factors that the board of directors considers relevant.
Our ability to distribute
dividends may be limited by future contractual obligations and by Israeli law. The Israeli Companies Law restricts our
ability to declare
dividends. Unless otherwise approved by a court, we can distribute dividends only from “profits” (as defined by the Israeli
Companies
Law), and only if there is no reasonable concern that the dividend distribution will prevent us from meeting our existing and
foreseeable obligations as they
become due. See Exhibit 2.1 “Description of Securities—Dividend and Liquidation Rights.”
The payment of dividends may be subject to Israeli
withholding taxes. See “Item 10. Additional Information — E.
Taxation — Israeli Tax Considerations and Government Programs — Taxation of Our
Shareholders — Dividends.”
108
B. Significant Changes
Except as disclosed elsewhere
in this Annual Report, there have been no other significant changes since December 31, 2024, until the date of the
filing of this Annual
Report.
Item 9. The Offer and Listing
A. Offer and Listing Details
Our ordinary shares are listed
on both Nasdaq and TASE under the symbol “KMDA.”
B. Plan of Distribution
Not applicable.
C. Markets for Ordinary Shares
See “—Offer and
Listing Details” above.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
A copy of our amended and
restated articles of association is attached as Exhibit 1.1 to this Annual Report. Other than as set forth below, the
information called
for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference into this Annual Report.
Establishment and Purposes of the Company
We were incorporated under
the laws of the State of Israel on December 13, 1990, under the name Kamada Ltd. We are registered with the Israeli
Registrar of Companies
in Jerusalem. Our registration number is 51-152460-5. Our purpose as set forth in our amended articles of association is to engage
in
any lawful business.
Shareholder Meetings
Under the Companies Law, we
are required to convene an annual general meeting of our shareholders at least once every calendar year and within
a period of not more
than 15 months following the preceding annual general meeting. In addition, the Companies Law provides that our board of directors
may
convene a special general meeting of our shareholders whenever it sees fit and is required to do so upon the written request of (i) two
directors or one
quarter of the serving members of our board of directors, or (ii) one or more holders of 5% or more of our outstanding
share capital and 1% of our voting
power, or the holder or holders of 5% or more of our voting power. Subject to the provisions of the
Companies Law and the regulations promulgated
thereunder, shareholders entitled to participate and vote at general meetings are the shareholders
of record on a date to be decided by the board of directors,
which in the case of an Israeli company whose shares are dual listed on the
TASE and on certain exchanges outside of Israel, such as the Nasdaq, may be
between four and 60 days prior to the date of the meeting.
The Companies Law requires that resolutions regarding the following matters (among others) be
approved by our shareholders at a general
meeting: amendments to our articles of association; appointment, terms of service and termination of service of
our auditors; election
of external directors; approval of certain related party transactions; increases or reductions of our authorized share capital; mergers;
dissolution of the company by a court, voluntary dissolution or voluntary dissolution in an expedited procedure, and the exercise of our
board of director’s
powers by a general meeting, if our board of directors is unable to exercise its powers and the exercise of
any of its powers is essential for our proper
management.
109
The chairman of our board
of directors presides over our general meetings. However, if at any general meeting the chairman is not present within
15 minutes after
the appointed time or is unwilling to act as chairman of such meeting, then the shareholders present will choose any other person present
to be chairman of the meeting.
Israeli law requires that
a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the
meeting and
if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with
office
holders or interested or related parties, an approval of a merger or the approval of the compensation policy, notice must be provided
at least 35 days prior to
the meeting.
Borrowing powers
Pursuant to the Companies
Law and our amended and restated articles of association, our board of directors may exercise all powers and take all
actions that are
not required under law or under our amended and restated articles of association to be exercised or taken by our shareholders, including
the
power to borrow money for company purposes.
C. Material Contracts
We have not entered into any
material contracts other than in the ordinary course of business and other than those described in “Item 4.
Information on the Company”
or elsewhere in this Annual Report.
D. Exchange Controls
There are currently no Israeli
currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the
ordinary shares or interest
or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a
state
of war with Israel.
Non-residents of Israel who
hold our ordinary shares are able to repatriate any dividends (if any), any amounts received upon the dissolution,
liquidation and winding
up of our affairs and proceeds of any sale of our ordinary shares, into non-Israeli currency at the rate of exchange prevailing at the
time of conversion, provided that any applicable Israeli income tax has been paid or withheld on these amounts. In addition, the statutory
framework for the
potential imposition of exchange controls has not been eliminated and may be restored at any time by administrative
action.
E. Taxation
The following description
is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and
disposition of our
ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any
tax
consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli Tax Considerations and Government Programs
The following is a brief summary
of the material Israeli tax laws applicable to us, and certain Israeli Government programs benefiting us. This
section also contains a
discussion of material Israeli tax consequences concerning the ownership of and disposition of our ordinary shares. This summary
does
not discuss all aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances
or to
some types of investors, such as traders in securities, who are subject to special treatment under Israeli law. The discussion below
is subject to amendment
under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which
could affect the tax consequences described
below.
The discussion below does
not cover all possible tax considerations. Potential investors are urged to consult their own tax advisors as to the Israeli
or other
tax consequences of the purchase, ownership and disposition of our ordinary shares, including in particular, the effect of any foreign,
state or local
taxes.
General Corporate Tax Structure in Israel
Israeli companies are generally
subject to corporate tax at a rate of 23%. However, the effective corporate tax rate payable by a company that
derives income from an
Approved Enterprise, a Privileged Enterprise, a Preferred Enterprise or a Preferred Technology Enterprise (as discussed below)
may be
considerably less. Capital gains generated by an Israeli company are generally subject to tax at the corporate tax rate.
Law for the Encouragement of Industry (Taxes),
1969
The Law for the Encouragement
of Industry (Taxes), 1969 (the “Encouragement of Industry Law”), provides several tax benefits to “Industrial
Companies.”
Pursuant to the Encouragement of Industry Law, a company qualifies as an Industrial Company if it is a resident of Israel and at least
90% of
its income in any tax year (other than income from certain governmental loans) is generated from an “Industrial Enterprise”
that it owns and is located in
Israel or in the “Area”, in accordance with its definition under section 3A of the Israeli
Income Tax Ordinance. An Industrial Enterprise is defined as an
enterprise whose principal activity, in a given tax year, is industrial
activity.
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An Industrial Company is entitled
to certain tax benefits, including: (i) a deduction of the cost of purchases of patents and know-how and the right
to use patents and
know-how used for the development or promotion of the Industrial Enterprise in equal amounts over a period of eight years, beginning
from
the year in which such rights were first used, (ii) the right to elect to file consolidated tax returns, under certain conditions, with
additional Israeli
Industrial Companies controlled by it, and (iii) the right to deduct expenses related to public offerings in equal
amounts over a period of three years
beginning from the year of the offering.
Eligibility for benefits under
the Encouragement of Industry Law is not contingent upon the approval of any governmental authority.
We believe that we may qualify
as an Industrial Company within the meaning of the Encouragement of Industry Law; however, there is no
assurance that we qualify or will
continue to qualify as an Industrial Company or that the benefits described above will be available in the future.
Law for the Encouragement of Capital Investments,
1959
The Investment Law, which has
undergone major reforms and several amendments in recent years, provides certain tax benefits to eligible
facilities. The different benefits
under the Investment Law depend on the specific year in which the enterprise received approval from the Investment
Center or the year
it was eligible for Approved/Privileged/Preferred/Preferred Technology Enterprise status under the Investment Law, and the benefits
available
at that time. Below is a short description of the different benefits available to us under the Investment Law:
Approved Enterprise
The Investment Law provides
that a capital investment in eligible production facilities (or other eligible assets) may, upon application to the
Investment Center,
be designated as an “Approved Enterprise.” Each certificate of approval for an Approved Enterprise relates to a specific investment
program delineated both by its financial scope, including its sources of capital, and by its physical characteristics, for example, the
equipment to be
purchased and utilized pursuant to the program. The tax benefits generated from any such certificate of approval relate
only to taxable income attributable
to the specific Approved Enterprise.
Our manufacturing facility
in Israel was granted Approved Enterprise status by the Investment Center, which made us eligible for a grant and
certain tax benefits
under the “Grant Track.” The approved investment program provided us with a grant in the amount of 24% of our approved
investments,
in addition to certain tax benefits, which applied to our turnover resulting from the operation of such investment program, for a period
of up to
ten consecutive years from the first year in which we generated taxable income. The tax benefits under the Grant Track include
accelerated depreciation
and amortization for tax purposes as well as a tax exemption for the first two years of the benefit period and
the taxation of income generated from an
Approved Enterprise at a reduced corporate tax rate of 10%-25% (depending on the level of foreign
investment in each year), for a certain period of time.
The benefit period is ordinarily seven to ten years commencing with the year in
which the Approved Enterprise first generates taxable income. The benefit
period is limited to 12 years from the earlier of the operational
year as determined by the Investment Center or 14 years from the date of approval of the
Approved Enterprise. The Company’s benefit
period ended by 2017.
Privileged Enterprise
On April 1, 2005, an amendment
to the Investment Law came into effect (the “2005 Amendment”), which revised the criteria for investments
qualified to receive
tax benefits. An eligible investment program under the 2005 Amendment will qualify for benefits as a “Privileged Enterprise”
(rather
than the previous terminology of Approved Enterprise). Pursuant to the 2005 Amendment, a company whose facilities meet certain
criteria set forth in the
2005 Amendment may claim certain tax benefits offered by the Investment Law (as further described below) directly
in its tax returns, without the need to
obtain prior approval. In order to receive the tax benefits, the company must make an investment
in the Privileged Enterprise which meets all of the
conditions, including exceeding a certain percentage or a minimum amount, specified
in the Investment Law. Such investment must be made over a period
of no more than three years ending at the end of the year in which the
company requested to have the tax benefits apply to the Privileged Enterprise (the
“Year of Election”).
In May 2012, we obtained a
tax ruling from the ITA according to which, among other things, our activity was qualified as an “industrial activity”,
as
defined in the Investment Law, and was eligible for tax benefits as a Privileged Enterprise under the “Tax Benefit Track,”
which apply to the turnover
attributed to such enterprise, for a period of up to ten years from the first year in which we generated taxable
income. According to the tax ruling, our Year
of Election was 2009. We subsequently elected 2012 as a Year of Election. The duration of
tax benefits is subject to a limitation of the earlier of seven to
ten years from the first year in which the company generated taxable
income (at or after the Year of Election), or 12 years from the first day of the Year of
Election. Therefore, the tax benefits under our
Privileged Enterprise expired at the end of 2023.
In January 2015, we obtained
a ruling from the ITA pursuant to which royalties-based income related to GLASSIA will be considered “Privileged
Income” (within
the meaning of the Investment Law), subject to meeting certain conditions detailed in the ruling.
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The term “Privileged
Enterprise” means an industrial enterprise which is “competitive” and contributes to the gross domestic product, and
for
which a minimum entitling investment was made in order to establish it (as explained above). For this purpose, an industrial enterprise
is deemed to be
competitive and contributing to the gross domestic product if it meets one of the following conditions: (1) its main activity
is in the field of biotechnology
or nanotechnology, as certified by the Director of the Industrial Research and Development Administration
before the project was approved; or (2) its
income during a tax year from sales to a certain market does not exceed 75% of its total income
from sales in that tax year; or (3) 25% or more of its total
income from sales in the tax year is from sales to a certain market with
at least 14,000,000 inhabitants.
A corporate taxpayer owning
a Privileged Enterprise may be entitled to an exemption from corporate tax on undistributed income for a period of
two to ten years, depending
on the location of the Privileged Enterprise within Israel, as well as a reduced corporate tax rate of 10% to 25% for the
remainder of
the benefit period, depending on the level of foreign investment in each year. In addition, the Privileged Enterprise is entitled to claim
accelerated depreciation for manufacturing assets used by the Privileged Enterprise.
However, a company that pays
a dividend out of income generated during the tax exemption period from the Privileged/Approved Enterprise is
subject to deferred corporate
tax with respect to the otherwise exempt income (grossed-up to reflect the pre-tax income that we would have had to earn in
order to distribute
the dividend) at the corporate tax rate which would have applied if the company had not enjoyed the exemption (i.e. at a tax rate between
10% and 25%, depending on the level of foreign investment). A company is generally required to withhold tax on such distribution at a
rate of 15% (or a
reduced rate under an applicable double tax treaty, subject to the approval by the ITA).
Preferred Enterprise
An amendment to the Investment
Law that became effective on January 1, 2011 (“Amendment No. 68”) changed the benefit alternatives available
to companies
under the Investment Law and introduced new benefits for income generated by a “Preferred Company” through its “Preferred
Enterprises”
(as such terms are defined in the Investment Law). The definition of a Preferred Company includes a company incorporated
in Israel that is not wholly
owned by a governmental entity, and that, among other things, owns a Preferred Enterprise and is controlled
and managed from Israel. The tax benefits
granted to a Preferred Company are determined depending on the location of its Preferred Enterprise
within Israel. Amendment No. 68 imposes a reduced
flat corporate tax rate which is not program-dependent and applies to the Preferred
Company’s “preferred income” which is generated by its Preferred
Enterprise.
According to the Investment
Law, a Preferred Company is subject to reduced corporate tax rate of 10% for preferred income attributed to
Preferred Enterprises located
in areas in Israel designated as Development Zone A and 15% for those located elsewhere in Israel in the tax years 2011-
2012, and 7% for
Development Zone A and 12.5% for the rest of Israel in the tax year 2013, and 9% for Development Zone A and 16% for the rest of
Israel
in the tax years 2014 until 2016. Under an amendment to the Investment Law that became effective on January 1, 2017, the corporate tax
rate
applying to income attributed to Preferred Enterprise located in Development Zone A was reduced to 7.5% while the reduced corporate
tax rate for the rest
of Israel remains 16%. Income derived by a Preferred Company from a “Special Preferred Enterprise” (as
such term is defined in the Investment Law)
would be entitled, during a benefits period of 10 years, to further reduced tax rates of 5%
if the Special Preferred Enterprise is located in Development
Zone A, or 8% if the Special Preferred Enterprise is located elsewhere in
Israel.
The tax benefits under Amendment
No. 68 also include accelerated depreciation and amortization for tax purposes during the first five-year period
for productive assets
that the Preferred Enterprise uses pursuant to the rates prescribed in the Investment Law. Preferred Enterprises located in specific
locations
within Israel (Development Zone A) are eligible for grants and/or loans approved by the Israeli Investment Center, as well as tax benefits.
Our
facility in Beit-Kama, Israel, is located in Development Zone A.
A dividend distributed from
income which is attributed to a Preferred Enterprise/Special Preferred Enterprise will generally be subject to
withholding tax at source
at the following rates: (i) Israeli resident corporation – 0%, (ii) Israeli resident individual – 20% (iii) non-Israeli resident
– 20%
subject to a reduced tax rate under the provisions of an applicable double tax treaty.
The provisions of Amendment
No. 68 do not apply to existing Privileged Enterprises or Approved Enterprises, which will continue to be entitled
to the tax benefits
under the Investment Law as in effect prior to Amendment No. 68. Nevertheless, a company owning such enterprises may choose to
apply Amendment
No. 68 to its existing enterprises while waiving benefits provided under the Investment Law as in effect prior to Amendment No. 68.
Once
a company elects to be classified as a Preferred Enterprise under the provisions of Amendment No. 68, the election cannot be rescinded,
and such
company will no longer enjoy the tax benefits of its Approved/Privileged Enterprises.
We believe that we satisfy the requirements of the Preferred Company
status, pursuant to Amendment 68, and while we have not yet utilized the
benefits under Amendment 68, we may do so in subsequent fiscal
years.
Technology Enterprises
An amendment to the Investment
Law was enacted as part of the Economic Efficiency Law that became effective as of January 1, 2017 (the “2017
Amendment”).
The 2017 Amendment provides new tax benefits for two types of “Technology Enterprises”, as described below, and is in addition
to the
other existing tax beneficial programs under the Investment Law.
The 2017 Amendment provides
that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and
will thereby
enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income”, as defined in the Investment
Law. The
tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in Development Zone A. In addition, a Preferred
Technology Enterprise
will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted
Intangible Assets” (as defined in the Investment
Law) to a related foreign company if the Benefitted Intangible Assets were acquired
from a foreign company on or after January 1, 2017 for at least NIS
200 million, and the sale receives prior approval from the National
Authority for Technological Innovation (“NATI”).
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The 2017 Amendment further
provides that a technology company satisfying certain conditions will qualify as a “Special Preferred Technology
Enterprise”
and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s
geographic location
within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6%
on capital gain derived from the sale of
certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted
Intangible Assets were either developed by the Special Preferred
Technology Enterprise or acquired from a foreign company on or after
January 1, 2017, and the sale received prior approval from NATI. A Special
Preferred Technology Enterprise that acquires Benefitted Intangible
Assets from a foreign company for more than NIS 500 million will be eligible for these
benefits for at least ten years, subject to certain
approvals as specified in the Investment Law.
Dividends distributed by a
Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology
Income, are generally subject
to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty (subject to
the receipt
in advance of a valid certificate from the ITA allowing for a reduced tax rate). However, if such dividends are paid to an Israeli company,
generally no tax is required to be withheld. If such dividends are distributed to a foreign company and other conditions are met, the
withholding tax rate
will generally be 4%.
We have applied for a new
tax ruling from the ITA according to which, if approved, among other things, our activity would be qualified as an
“industrial activity,”
as defined in Investment Law, and we may be eligible for tax benefits according to the Investment Law, and our income from sales of
our
Proprietary Products (including royalties-based income) would be deemed “Preferred Income” or “Preferred Technology
Income” (in each case, within
the meaning of the Investment Law), to the extent we meet the requirements of being a Preferred Technology
Enterprise.
There can be no assurance
that we will comply with the conditions required to remain eligible for benefits under the Investment Law in the future,
including under
the tax ruling (if obtained), or that we will be entitled to any additional benefits thereunder. If we do not fulfill these conditions
in whole or
in part, the benefits can be canceled and we may be required to refund the amount of the benefits, linked to the Israeli consumer
price index, with interest.
Tax benefits under the 2021 Amendment that
became effective on August 15, 2021
Israel’s 2021-2022 Budget
Law published on November 15, 2021, introduced a new dividend distribution ordering rule according to which in the
event of a dividend
distribution, earnings that were tax exempt under the historical Approved or Beneficial Enterprise regimes, and that were accrued or
derived
until December 31, 2020, referred to as “trapped earnings,” must be distributed on a pro-rata basis from any dividend distribution,
commencing
August 15, 2021 and onwards. As we had not utilized any tax benefits under the Investment Law prior to December 31, 2020, we
do not have “trapped
earnings.”
The Encouragement of Industrial Research, Development
and Technological Innovation in the Industry Law, 5744-1984 (formerly known as The
Encouragement of Industrial Research and Development
Law, 5744-1984)
We have received grants
from the Government of the State of Israel through the Israel Innovation Authority of the Israeli Ministry of Economy
and Industry
(the “IIA”) (formerly known as the Office of the Chief Scientist of the Israeli Ministry of Economy (the
“OCS”)), for the financing of a
portion of our research and development expenditures pursuant to the Encouragement of
Research, Development and Technological Innovation in the
Industry Law 5744-1984 (formerly known as the Encouragement of Industrial
and Development Law, 5744-1984) (the “Research Law”) and related
regulations. We previously received funding from the
IIA for eight research and development programs, in the aggregate amount of approximately $2.1
million as of December 31, 2024,
which amount includes accrued aggregate interest as of such date, and we had paid aggregate royalties to the
IIA for
these programs in the amount of approximately $1.2 million and had a contingent liability to the IIA in the amount of
approximately $0.9 million
(excluding any interest thereon) as of December 31, 2024.
Under the Research Law, research
and development programs which meet specified criteria and are approved by the IIA (formerly the OCS) may
be eligible for grants. Under
the Research Law, as currently in effect, the grants awarded are typically up to 50% of the project’s expenditures. The grantee
is required to pay royalties to the State of Israel from the sale of products (and associated services) developed under the program. Regulations
under the
Research Law, as currently in effect, generally provide for the payment of royalties of 3% to 5% on sales of products and services
based on technology
developed using grants, until 100% (which may be increased under certain circumstances, as described below) of the
U.S. dollar-linked value of the grant is
repaid, plus interest. Until October 25, 2023, the interest was calculated at a rate based on
the last published 12-month LIBOR applicable to U.S. dollar
deposits. On October 25, 2023, the IIA published a directive concerning changes
in royalties to address the expiration of the LIBOR, according to which,
(a) for IIA grants approved between January 1, 1999 and June
30, 2017 – the annual interest will be the interest in effect at the time of the grant approval;
(b) for IIA grants approved between
July 1, 2017 and December 31, 2023 – for the period prior to December 31, 2023, the interest shall be calculated based
on the 12-month
LIBOR applicable to U.S. dollar deposits, as published on the first trading day of each year or in an alternative publication of the Bank
of
Israel; and for periods as of January 1, 2024, the annual interest shall be calculated at a rate based on the 12-month secured overnight
financing rate
(SOFR), or at an alternative rate published by the Bank of Israel plus 0.71513%; and (c) for IIA grants approved on or
following January 1, 2024, the
annual interest shall be the higher of (i) the 12 months SOFR interest rate, plus 1%, and (ii) a fixed
annual interest rate of 4%.
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The terms of the IIA grants
generally require that products developed with such grants be manufactured in Israel and that the technology
developed thereunder may
not be transferred outside of Israel, unless prior approval is received from the IIA and additional payments are made to the State
of
Israel. However, this does not restrict the export of products that incorporate the funded technology. If we were to receive IIA approval
to manufacture
or to transfer the rights to manufacture our products developed with IIA grants outside of Israel, the royalty repayment
ceiling may increase to up to one
and a half times the amount of the grant received (plus interest) if manufacturing is moved outside
of Israel (depending on the portion of total
manufacturing to be performed outside of Israel), and if the funded technology itself is
transferred outside of Israel, we may be required to pay a
redemption fee of up to six times the amount of the grants (less paid royalties,
if any, and depreciation, but no less than the total grants received), plus
interest. Even following the full repayment of any IIA grants,
we must nevertheless continue to comply with the requirements of the Research Law. If we
fail to comply with any of the conditions and
restrictions imposed by the Research Law, or by the specific terms under which we received the grants, we
may be required to refund any
grants previously received together with interest and penalties, and, in certain circumstances, may be subject to criminal
charges.
Taxation of Our Shareholders
The Israeli Income Tax Ordinance
applies Israeli income tax on a worldwide basis with respect to Israeli residents, and on an Israeli source
income, with respect to non-Israeli
residents. Dividends distributed (or deemed distributed) by an Israeli resident company to a holder in respect of its
securities and consideration
received by a holder (or deemed received) in connection with the sale or other disposition of securities of an Israeli resident
company
are considered to be an Israeli source income.
Capital Gains
Under present Israeli tax
legislation, the tax rate applicable to real capital gain derived by Israeli resident corporations from the sale of shares of an
Israeli
company is the general corporate tax rate (currently, 23%).
Generally, as of January 1,
2006, the tax rate applicable to real capital gain derived by Israeli individuals from the sale of shares which had been
purchased on
or after January 1, 2003, whether or not listed on a stock exchange, is 25%, unless such shareholder claims a deduction for interest and
linkage differences expenses in connection with the purchase and holding of such shares. Additionally, if such a shareholder is considered
a “Substantial
Shareholder” (i.e., a person who holds, directly or indirectly, alone or together with another, 10% or more
of any of the company’s “means of control”
(including, among other things, the right to receive profits of the company,
voting rights, the right to receive the company’s liquidation proceeds and the
right to appoint a director)) at the time of sale
or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30%. Individual
shareholders dealing in securities
in Israel are taxed at their marginal tax rates applicable to business income (up to 47% from 2017).
Notwithstanding the foregoing,
capital gains generated from the sale of shares by a non-Israeli shareholder may be exempt from Israeli taxes
provided that, in general,
both the following conditions are met: (i) the seller of the shares does not have a permanent establishment in Israel to which the
generated
capital gain is attributed and (ii) if the seller is a corporation, less than 25% of its means of control are held, directly and indirectly,
by Israeli
residents or Israeli residents that are the beneficiaries or are eligible to less than 25% of the seller’s income or
profits from the sale. In addition, the sale of
the shares may be exempt from Israeli capital gain tax under the provisions of an applicable
tax treaty. For example, the Convention between the
Government of the United States of America and the Government of Israel with respect
to Taxes on Income, or the “Israel-U.S.A. Double Tax Treaty,”
generally exempts U.S. residents from Israeli capital gains
tax in connection with such sale, provided that (i) the U.S. resident owned, directly or indirectly,
less than 10% of the Israeli resident
company’s voting power at any time within the 12-month period preceding such sale; (ii) the seller, if an individual,
has been present
in Israel for less than 183 days (in the aggregate) during the taxable year; and (iii) the capital gain from the sale was not generated
through
a permanent establishment of the U.S. resident in Israel.
The purchaser of the shares,
the stockbrokers who effected the transaction or the financial institution holding the shares through which payment to
the seller is made
are obligated, subject to the above-referenced exemptions if certain conditions are met, to withhold tax on the real capital gain resulting
from a sale of shares at the rate of 25%.
A detailed return, including
a computation of the tax due, must be filed and an advance payment must be paid on January 31 and July 31 of each
tax year for sales of
shares traded on a stock exchange made within the six months preceding the month of the report. However, if the seller is exempt from
tax or all tax due was withheld at the source according to applicable provisions of the Israeli Income Tax Ordinance and the regulations
promulgated
thereunder, the return does not need to be filed and an advance payment does not need to be made. Taxable capital gains are
also reportable on an annual
income tax return if applicable.
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Dividends
Our company is obligated to
withhold tax, at the rate of 15%, upon the distribution of a dividend attributed to a Privileged Enterprise’s income,
subject to
a reduced tax rate under the provisions of an applicable double tax treaty, provided that a certificate from the ITA allowing for a reduced
withholding tax rate is obtained in advance. If the dividend is distributed from income not attributed to a Privileged Enterprise, the
following withholding
tax rates will generally apply: (i) Israeli resident corporations — 0%, (ii) Israeli resident individuals
— 25% (or 30% in the case of a Substantial
Shareholder) and (iii) non-Israeli residents (whether an individual or a corporation),
so long as the shares are registered with a nominee company — 25%,
subject to a reduced tax rate under the provisions of an applicable
double tax treaty, provided that a certificate from the ITA allowing for a reduced
withholding tax rate is obtained in advance. Generally,
unless the recipient of the dividend is a U.S. corporate resident which holds at least 10% of the share
capital of the Company, the withholding
rate will not be reduced under the Israel-U.S.A. Double Tax Treaty.
Excess Tax
Individual holders who are
subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) and who have taxable
income that
exceeds a certain threshold in a tax year (NIS 698,280 for 2023 and NIS 721,560 for 2024 and 2025), will be subject to an additional tax
on
any income in excess of such amount, at the rate of 3% on any such taxable income prior to January 1, 2025 and commencing January 1,
2025, at the rate
of 3% of any such active taxable income and 5% of any such passive taxable income. For this purpose, passive taxable
income includes taxable capital
gains from the sale of securities and taxable income from interest and dividends, subject to the provisions
of an applicable double tax treaty.
Estate and gift tax
Israeli law presently does
not impose estate or gift taxes.
United States Federal Income Taxation
The following is a summary
of the material U.S. federal income tax consequences to a U.S. Holder (as defined below) of the ownership and
disposition of our ordinary
shares. This summary addresses only the material U.S. federal income tax consequences to U.S. Holders (as defined below) that
will hold
our ordinary shares as capital assets for U.S. federal income tax purposes (generally, property held for investment). In addition, it
does not
describe all of the tax consequences that may be relevant in light of a U.S. Holder’s particular circumstances, including
state, local and non-U.S. tax
consequences, estate and gift tax consequences, alternative minimum tax consequences, special accounting
rules under Section 451(b) of the Code, and tax
consequences applicable to U.S. Holders, subject to special rules, such as:
●
banks, certain financial institutions or insurance companies;
●
real estate investment trusts, regulated investment companies or grantor trusts;
●
dealers or traders in securities, commodities or currencies;
●
tax-exempt entities;
●
U.S. expatriates and certain former citizens or long-term residents of the United States;
●
persons that received our shares pursuant to the exercise of an employee stock option or otherwise as compensation;
●
persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S.
federal income tax purposes;
●
partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or holders that
will hold our shares through such an entity;
●
S-corporations;
●
persons whose “functional currency” is not the U.S. Dollar;
●
persons that own directly, indirectly or through attribution 10% or more of the voting power or value of our ordinary shares; or
●
persons holding our ordinary shares in connection with a trade or business conducted outside the United States.
This summary is based on the
U.S. Internal Revenue Code of 1986, as amended, (the “Code”), existing, proposed and temporary U.S. Treasury
Regulations and
judicial and administrative interpretations thereof, in each case as in effect on the date hereof. All of the foregoing is subject to
change,
which change could apply retroactively and could affect the tax consequences described below. There can be no assurance that the
U.S. Internal Revenue
Service (“IRS”) will not take a different position concerning the tax consequences of the ownership
and disposition of our ordinary shares or that the IRS’s
position would not be sustained.
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For purposes of this description,
a “U.S. Holder” is a beneficial owner of our ordinary shares that, for U.S. federal income tax purposes, is:
●
an individual citizen or resident of the United States;
●
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States or District of Columbia or any political subdivision thereof;
●
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
●
a trust if (1) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust or (2) the trust has a valid election to be treated as a U.S. person under applicable U.S.
Treasury Regulations.
Holders of our ordinary shares
should consult their own tax advisors concerning the particular U.S. federal income tax consequences to them of
the ownership and disposition
of our ordinary shares in light of their own particular circumstances, as well as the consequences to them arising under other
U.S. federal,
state and local tax laws and the laws of any other taxing jurisdiction.
Distributions
Subject to the discussion
below under “Passive Foreign Investment Company Considerations,” non-liquidating distributions made to a U.S.
Holder with
respect to our ordinary shares before reduction for any Israeli taxes withheld therefrom, other than certain pro rata distributions of
our ordinary
shares to all our shareholders, generally will be includible in the U.S. Holder’s income as dividend income to the
extent the distribution is paid out of our
current or accumulated earnings and profits as determined under U.S. federal income tax principles.
We do not expect to maintain calculations of our
earnings and profits under U.S. federal income tax principles and, therefore, U.S. Holders
should expect that the entire amount of any distribution generally
will be reported as dividend income. Subject to the discussion below
under “—Passive Foreign Investment Company Considerations,” non-corporate U.S.
Holders may qualify for the lower rates
of taxation with respect to dividends on ordinary shares applicable to “qualified dividend income” received from a
“qualified
foreign corporation” provided that certain conditions are met, including certain holding period requirements and the absence of
certain risk
reduction transactions. A non-U.S. corporation will generally be considered a qualified foreign corporation (i) if it is
eligible for the benefits of a
comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines
is satisfactory for purposes of these rules
and which includes an exchange of information provision (which includes the Treaty), or (ii)
with respect to any dividend it pays on ordinary shares which
are readily tradable on an established securities market in the United States
Our ordinary shares are listed on Nasdaq, which is a qualified exchange for
these purposes. Consequently, if our ordinary shares continue
to be listed on Nasdaq and are regularly traded, we expect to be a qualified foreign
corporation for purposes of dividends paid by us
with respect to our ordinary shares constituting qualified dividend income. However, the qualified
dividend income treatment will not
apply if we are treated as a PFIC with respect to the U.S. Holder for our taxable year of the distribution or the preceding
taxable year.
However, with respect to corporate U.S. Holders, dividends on our ordinary shares will not be eligible for the dividends received deduction
generally allowed to corporate U.S. Holders in respect of dividends received from other U.S. corporations. Subject to the discussion below
under “—
Passive Foreign Investment Company Considerations,” to the extent that the amount of any distribution by us
exceeds our current and accumulated
earnings and profits as determined under U.S. federal income tax principles, it will be treated first
as a tax-free return of your tax basis in our ordinary
shares and thereafter as capital gain.
Dividends paid to U.S. Holders
with respect to our ordinary shares will be treated as foreign source income, which may be relevant in calculating
a U.S. Holder’s
foreign tax credit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from taxable
income or credited against U.S. federal income tax liability. An election to deduct foreign taxes instead of claiming foreign tax credits
applies to all foreign
taxes paid or accrued in the taxable year. The limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of
income. For this purpose, dividends that we distribute generally should constitute “passive
category income,” or, in the case of certain U.S. Holders,
“general category income.” A foreign tax credit for foreign
taxes imposed on distributions may be denied if certain minimum holding period requirements
are not satisfied. The rules relating to the
determination of the foreign tax credit are complex, and U.S. Holders should consult their tax advisors to
determine whether and to what
extent they will be entitled to this credit.
Sale, Exchange or Other Disposition of Ordinary Shares
Subject to the discussion
below under “Passive Foreign Investment Company Considerations,” U.S. Holders generally will recognize gain or loss
on the
sale, exchange or other taxable disposition of our ordinary shares equal to the difference between the amount realized on the sale, exchange
or other
disposition and the holder’s tax basis in our ordinary shares, and any gain or loss will be capital gain or loss. The tax
basis in an ordinary share generally
will be equal to the cost of the ordinary share. For non-corporate U.S. Holders, capital gain from
the sale, exchange or other disposition of ordinary shares
is generally eligible for a preferential rate of taxation in the case of long-term
capital gain. The deductibility of capital losses for U.S. federal income tax
purposes is subject to limitations under the Code. Any gain
or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for
foreign tax credit limitation purposes.
116
Passive Foreign Investment Company Considerations
If we were to be classified
as a PFIC in any taxable year, a U.S. Holder would be subject to special rules generally intended to reduce or eliminate
any benefits
from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company holding certain assets
or
receiving certain income that does not distribute its earnings on a current basis.
A non-U.S. corporation will
be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-
through rules,
either:
●
at least 75% of its gross income is “passive income”, or
●
at least 50% of the average quarterly value of its gross assets is attributable to assets that produce passive income or are held for the
production of passive income.
Passive income for this purpose
generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions, the
excess of gains over
losses from the disposition of assets which produce passive income and amounts derived by reason of the temporary investment of
funds
raised in offerings of our ordinary shares. If a non-U.S. corporation owns at least 25% by value of the stock of another corporation,
the non-U.S.
corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation
and as directly receiving its
proportionate share of the other corporation’s income. If we are classified as a PFIC in any year
with respect to which a U.S. Holder owns our ordinary
shares, we generally will continue to be treated as a PFIC with respect to that
U.S. Holder in all succeeding years during which the U.S. Holder owns our
ordinary shares, regardless of whether we continue to meet the
tests described above.
However, our PFIC status for
each taxable year may be determined only after the end of such year and will depend on the composition of our
income and assets, our activities
and the value of our assets (which may be determined in large part by reference to the market value of our ordinary shares,
which may
be volatile) from time to time. If we are a PFIC then unless a U.S. Holder makes one of the elections described below, a special tax regime
will
apply to both (i) any “excess distribution” by us to that U.S. Holder (generally, the U.S. Holder’s ratable portion
of distributions in any year which are
greater than 125% of the average annual distribution received by the holder in the shorter of the
three preceding years or its holding period for our ordinary
shares) and (ii) any gain realized on the sale or other disposition of the
ordinary shares.
Based on the financial information
currently available to us and the nature of our business, we do not expect that we will be classified as a PFIC
for the taxable year ended
December 31, 2024. However, this determination could be subject to change. If, contrary to our expectations, we were to be
classified
as a PFIC, U.S. Holders of ordinary shares may be required to file form 8621 with respect to their ownership of our ordinary shares in
the year in
which we were a PFIC. U.S. Holders of our ordinary shares should consult their tax advisors in this regard.
Under this regime, any excess
distribution and realized gain will be treated as ordinary income and will be subject to tax as if (i) the excess
distribution or gain
had been realized ratably over the U.S. Holder’s holding period, (ii) the amount deemed realized in each year had been subject to
tax in
each year of that holding period at the highest marginal rate for that year (other than income allocated to the current period
or any taxable period before we
became a PFIC, which will be subject to tax at the U.S. Holder’s regular ordinary income rate for
the current year and will not be subject to the interest
charge discussed below), and (iii) the interest charge generally applicable to
underpayments of tax had been imposed on the taxes deemed to have been
payable in those years. In addition, dividend distributions made
to a U.S. Holder will not qualify for the lower rates of taxation applicable to long-term
capital gains discussed above under “Distributions.”
Certain elections may be available that would result in an alternative treatment (such as mark-to-
market treatment, which very generally
involves including in ordinary income for each year an amount equal to the excess, if any, of the fair market value
of a U.S. Holder’s
ordinary shares at the close of the taxable year over the U.S. Holder’s adjusted tax basis in the ordinary shares) of our ordinary
shares.
We do not intend to provide the information necessary for a U.S. Holder to make a “qualified electing fund election”
if we are classified as a PFIC. U.S.
Holders should consult their tax advisors to determine whether any of these elections would be available
and, if so, what the consequences of the alternative
treatments would be in their particular circumstances. Each U.S. Holder should consult
its tax advisor as to whether any election is available or advisable
with respect to our ordinary shares.
If we are determined to be
a PFIC, the general tax treatment for U.S. Holders described in this paragraph would apply to indirect distributions and
gains deemed
to be realized by U.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs.
In addition, all U.S. Holders
may be required to file tax returns (including on IRS Form 8621) containing such information as the U.S. Treasury
may require. For example,
if a U.S. Holder owns ordinary shares during any year in which we are classified as a PFIC and the U.S. Holder recognizes gain
on a disposition
of our ordinary shares or receives distributions with respect to our ordinary shares, the U.S. Holder generally will be required to file
an IRS
Form 8621 with respect to the company, generally with the U.S. Holder’s U.S. federal income tax return for that year. The
failure to file this form when
required could result in substantial penalties.
117
Backup Withholding and Information Reporting
Requirements
U.S. backup withholding and
information reporting requirements may apply to payments to holders of our ordinary shares. Information reporting
generally will apply
to payments of dividends on, and to proceeds from the sale of, our ordinary shares made within the United States, or by a U.S. payor or
U.S. middleman, to a holder of our ordinary shares, other than an exempt recipient (including a corporation). A payor may be required
to backup withhold
at a rate of 24% from payments of dividends on, or the proceeds from the sale or redemption of, ordinary shares within
the United States, or by a U.S.
payor or U.S. middleman, to a holder, other than an exempt recipient, if the holder fails to furnish its
correct taxpayer identification number or otherwise
fails to comply with, or establish an exemption from, the backup withholding tax requirements.
Backup withholding is not
an additional tax. Any amounts withheld under the backup withholding rules generally should be allowed as a credit
against the beneficial
owner’s U.S. federal income tax liability, if any, and any excess amounts withheld under the backup withholding rules may be
refunded,
provided that the required information is timely furnished to the IRS.
Additional Medicare Tax
Certain U.S. Holders who are
individuals, estates or trusts may be required to pay an additional 3.8% Medicare tax on, among other things,
dividends and capital gains
from the sale or other disposition of shares of common stock. For individuals, the additional Medicare tax applies to the lesser
of (i)
“net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married
and filing jointly or $125,000 if
married and filing separately). “Net investment income” generally equals the taxpayer’s
gross investment income reduced by the deductions that are
allocable to such income. U.S. Holders will likely not be able to credit foreign
taxes against the 3.8% Medicare tax.
Foreign Asset Reporting
Certain U.S. Holders who are
individuals (and certain domestic entities) may be required to report information relating to an interest in our
ordinary shares, subject
to certain exceptions (including an exception for shares held in accounts maintained by U.S. financial institutions). U.S. Holders
are
urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition
of our
ordinary shares.
The above description is
not intended to constitute a complete analysis of all tax consequences relating to the ownership and disposition of
our ordinary shares.
Holders of our ordinary shares should consult their own tax advisors concerning the particular tax consequences to them of
the ownership
and disposition of our ordinary shares in light of their own particular circumstances, as well as the consequences to them arising
under
Israeli, U.S. federal, state and local tax laws and the laws of any other taxing jurisdiction.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to certain
of the reporting requirements of Exchange Act, as applicable to “foreign private issuers” as defined in Rule 3b-4 under
the
Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and
reports on
Form 6-K. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information
regarding
registrants like us that file electronically with the SEC. You can also inspect the Annual Report on that website. Our SEC filings
are also generally available
to the public via the Israel Securities Authority’s Magna website at www.magna.isa.gov.il, and the
TASE website at http://www.maya.tase.co.il.
A copy of each document (or
a translation thereof to the extent not in English) concerning our company that is referred to in this Annual Report is
available for
public view (subject to confidential treatment of certain agreements pursuant to applicable law) at our principal executive offices.
I. Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to changes
in interest as our financial debt bears floating and fixed interest rates. In addition, our exposure is also related to cash
balance invested
in interest-bearing deposits.
118
Foreign Currency Risk
Fluctuations in exchange rates,
especially the NIS against the U.S. dollar, may affect our results, as part of our assets is linked to NIS, as are part
of our liabilities.
Changes in exchange rates may also affect the prices of products purchased by us and designated for marketing in Israel in cases where
these product prices are not linked to the U.S. dollar and during the period after these products are sold to our customers in NIS. In
addition, the fluctuation
in the NIS exchange rate against the U.S. dollar may impact our results, as a portion of our manufacturing cost
is NIS denominated.
For the years ended December
31, 2024, 2023 and 2022, we have witnessed high volatility in the U.S. dollar exchange rate. This fact impacts our
revenues from the Distribution
segment, where prices are denominated in or linked to the NIS upon delivery of product while our expenses for the purchase
of raw materials
and imported goods in the Distribution segment are in U.S. dollars and part of our development and marketing expenses are paid in NIS.
We attempt to mitigate our
currency exposure by matching assets denominated in NIS currency with liabilities denominated in NIS. In the
Distribution segment, we
attempt to mitigate foreign currency exposure by matching Euro denominated expenses with Euro denominated revenues.
Additionally, we use,
and from time to time, will continue to use, currency hedging transactions using financial derivatives and forward currency contracts.
We attempt to enter into forward currency contracts with critical terms that match those of the underlying exposure. As of December 31,
2024, we had open
transactions in derivatives in the amount of approximately $3 million. We regularly monitor and review the need for
currency hedging transactions in
accordance with trend analysis.
The following table presents
information about the changes in the exchange rates of the NIS against the U.S. dollar:
Period
Change in
Average
Exchange Rate
of the NIS
against the
U.S. Dollar
(%)
Year ended December 31, 2022
13.2
Year ended December 31, 2023
3.1
Year ended December 31, 2024
0.6
As of December 31, 2024, we
had excess liabilities over assets denominated in NIS in the amount of $17.0 million. When the U.S. dollar
appreciates against the NIS,
we recognize financial expenses with respect to exchange rate differences. When the U.S. dollar depreciates against the NIS,
we recognize
financial income.
A 10% increase (decrease)
in the value of the NIS against the U.S. dollar would have decreased (increased) our financial assets by $1.7 million,
$0.9 million and
$0.1 million as of December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2024, we
had foreign currency exposures to currencies other than U.S. dollars and NIS amounting to $0.6 million in excess
liabilities over assets.
Most of this exposure is to the Euro.
Item 12. Description of Securities Other Than
Equity Securities
Not applicable.
119
PART II
Item 13. Defaults, Dividend Arrearages and
Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights
of Security Holders and Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
(a) Disclosure Controls
and Procedures. Our management, under the supervision and with the participation of our Chief Executive Officer and our
Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024, pursuant to Rule 13a-15 under
the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer (the principal executive and principal
financial
officer, respectively) have concluded that our disclosure controls and procedure are effective to provide reasonable assurance
that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated
to our management, including our
principal executive officer and principal financial officer, or persons performing similar functions,
as appropriate to allow timely decisions regarding
required disclosure, and is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules and forms.
(b) Report of Management
on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining
adequate internal control
over financial reporting. Our management has assessed the effectiveness of internal control over financial reporting based on the
Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on
this assessment, our management has concluded that our internal control over financial reporting as of December 31, 2024 was effective.
(c) Attestation Report
of the Registered Public Accounting Firm. Our independent registered public accounting firm, Kost Forer Gabbay &
Kasierer, a member
of EY Global, has audited the consolidated financial statements included in this annual report on Form 20-F, and as part
of its audit, has
issued its audit report on the effectiveness of our internal control over financial reporting as of December 31, 2024.
The report of Kost Forer Gabbay &
Kasierer, a member of EY Global, is included with our consolidated financial statements
included elsewhere in this annual report and is incorporated herein
by reference.
(d) Changes in Internal
Control over Financial Reporting. During the period covered by this report, we have not made any changes to our internal
control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
120
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our board of directors has
determined that each of Assaf Itshayek and Lilach Payorski is an “independent” director for purposes of serving on an
audit
committee under the Exchange Act and Nasdaq listing requirements and qualifies as an “audit committee financial expert,” as
defined in Item 407(d)
(5) of Regulation S-K.
Item 16B. Code of Ethics
We have adopted a Code of
Ethics, which applies to our directors, officers and employees, including our Chief Executive Officer and Chief
Financial Officer, principal
accounting officer or controller, and persons performing similar functions. The Code of Ethics is posted on our website,
www.kamada.com.
Item 16C. Principal Accountant Fees and Services
During the years ended December
31, 2024 and 2023, we were billed the following aggregate fees for the professional services rendered by Kost
Forer Gabbay& Kasierer,
a member of EY Global, independent registered public accounting firm, all of which were pre-approved by our Audit Committee:
Year Ended
December 31,
2024
2023
Audit Fees (1)
$
430,000
430,000
Tax Fees (2)
7,036
111,243
All Other Fees (3)
33,020
8,041
Total
$
470,056
549,284
(1) Audit fees are aggregate fees for audit services for each of the years shown in this table, including fees associated with the annual audit and reviews of
our quarterly financial results submitted on Form 6-K, the auditor attestation report on the effectiveness of our internal control over financial reporting,
consultations on various accounting issues and audit services provided in connection with other statutory or regulatory filings.
(2) Tax services rendered by our auditors in 2024 and 2023 were for compliance with tax regulation.
(3) Other fees in 2024 were mainly related to consulting services for IT upgrades and in 2023 were for ESG related consulting services.
Our audit committee has adopted
a policy for pre-approval of audit and non-audit services provided by our independent auditor. Under the policy,
such services require
the specific pre-approval of our audit committee followed by ratification of our full board of directors. Any proposed services
exceeding
the pre-approval amounts for all services to be provided by our independent auditor require additional specific pre-approval by our audit
committee followed by the approval of our full board of directors.
Item 16D. Exemptions from the Listing Standards
for Audit Committees
Not applicable.
Item 16E. Purchase of Equity Securities by
the Issuer and Affiliated Purchasers
In the year ended December
31, 2024, neither we nor any affiliated purchaser (as defined in the Exchange Act) purchased any of our ordinary
shares.
Item 16F. Change in Registrant’s Certifying
Accountant
None.
121
Item 16G. Corporate Governance
As a foreign private issuer
whose shares are listed on the Nasdaq Global Select Market, we have the option to follow Israeli corporate governance
practices rather
than certain of those of Nasdaq, except to the extent that such laws would be contrary to U.S. securities laws and provided that we disclose
the practices we are not following and describe the home country practices we follow instead. We rely on this “foreign private issuer
exemption” with
respect to the following Nasdaq requirements:
●
Distribution of annual and quarterly reports to shareholders. Under Israeli law, as a public company whose shares are traded on the TASE,
we are not required to distribute annual and quarterly reports directly to shareholders and the generally accepted business practice in Israel is
not to distribute such reports to shareholders but to make such reports publicly available through the website of the Israel Securities Authority
and the TASE. In addition, we make our audited financial statements available to our shareholders at our offices.
●
Shareholder approval requirements for equity issuances and equity-based compensation plans. Under the Companies Law, the adoption of,
and material changes to, equity-based compensation plans generally require the approval of the board of directors (for approval of equity-
based arrangements, see “Item 6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Related Party
Transactions under Israeli Law — Disclosure of Personal Interests of a Controlling Shareholder and Approval of Certain Transactions,” “Item
6. Directors, Senior Management and Employees — Compensation of Directors” and “Item 6. Directors, Senior Management and Employees
— Compensation of Executive Officers”). Similarly, the approval of the board of directors is generally sufficient for a private placement
unless the private placement is deemed a “significant private placement” (see “Item 6. Directors, Senior Management and Employees —
Approval of Significant Private Placements”), in which case shareholder approval is also required, or an office holder or a controlling
shareholder or their relative has a personal interest in the private placement, in which case, audit committee approval is required prior to the
board approval and, for a private placement in which a controlling shareholder or its relative has a personal interest, shareholder approval is
also required (see “Item 6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Related Party Transactions
under Israeli Law”).
●
Requirement for independent oversight on our director nominations process and to adopt a formal written charter or board resolution
addressing the nominations process. In accordance with Israeli law and practice, directors are recommended by our board of directors for
election by our shareholders. The Damar Group and Recananti Group have entered into a shareholders’ agreement which includes an
agreement about voting in the election of nominees appointed by the other party (see “Item 7. Major Shareholders and Related Party
Transactions — Related Party Transactions — Shareholders’ Agreement”). As permitted under the Companies Law, we do not have a formal
charter addressing the nominations process.
●
Quorum requirement. Under our articles of association and as permitted under the Companies Law, a quorum for any meeting of shareholders
shall be the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting
power of our shares instead of 33 1/3% of the issued share capital required under Nasdaq requirements. At an adjourned meeting, any number
of shareholders shall constitute a quorum.
Except as stated above, we
comply with the rules generally applicable to U.S. domestic companies listed on Nasdaq. We may in the future decide
to use other foreign
private issuer exemptions with respect to some or all of the other Nasdaq listing requirements. Following our home country governance
practices, as opposed to the requirements that would otherwise apply to a company listed on Nasdaq, may provide less protection than is
accorded to
investors under Nasdaq listing requirements applicable to domestic issuers. For more information, see “Item 3. Key Information
—D. Risk Factors — As
we are a “foreign private issuer” and follow certain home country corporate governance
practices instead of otherwise applicable Nasdaq corporate
governance requirements, our shareholders may not have the same protections
afforded to shareholders of domestic U.S. issuers that are subject to all
Nasdaq corporate governance requirements.” We are
also required to comply with Israeli corporate governance requirements under the Companies Law
and the regulations promulgated thereunder
applicable to Israeli public companies whose shares are listed for trade on an exchange outside Israel and dual
listed on the TASE.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions
That Prevent Inspections
Not applicable.
Item 16J. Insider trading policies
We have adopted a policy that
governs the trading in our securities by our directors, officers, employees and certain other covered persons, and
which is reasonably
designed to promote compliance with applicable insider trading laws, rules and regulations and applicable Nasdaq listing standards. A
copy of our Insider Trading Policy is included as Exhibit 11.1 to this Annual Report.
122
Item 16K. Cybersecurity
Cybersecurity represents an
important component of the Company’s overall approach to risk management. The Company’s cybersecurity policies,
standards
and practices are integrated into the Company’s enterprise risk management (“ERM”) approach, and cybersecurity risks
are one of the enterprise
risks that are subject to oversight by the Company’s Board of Directors. The Company approaches cybersecurity
threats through a cross-functional
approach which endeavors to: (i) identify, prevent and mitigate cybersecurity threats to the Company;
(ii) preserve the confidentiality, security and
availability of the information that we collect and store to use in our business; (iii)
protect the Company’s intellectual property; (iv) maintain the confidence
of our customers and business partners; and (v) provide
appropriate public disclosure of cybersecurity risks and incidents when required.
Risk Management and
Strategy
The Company’s cybersecurity
program focuses on the following areas:
●
Vigilance: The Company maintains cybersecurity threat operations with the goal of identifying, preventing and mitigating cybersecurity
threats and responding to cybersecurity incidents in accordance with our established incident response and recovery plans.
●
Systems Safeguards: The Company deploys systems safeguards that are designed to protect the Company’s information systems from
cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality and access controls, which
are evaluated and improved through ongoing vulnerability assessments and cybersecurity threat intelligence.
●
Collaboration: The Company utilizes collaboration mechanisms established with certain third-party service providers, to identify, assess and
respond to cybersecurity risks.
●
Third-Party Risk Management: The Company endeavors to identify and oversee cybersecurity risks presented by third parties, as well as
the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party
systems.
●
Training: The Company provides periodic training for personnel regarding cybersecurity threats, which reinforces the Company’s
information security policies, standards and practices.
●
Incident Response and Recovery Planning: The Company has established and maintains incident response and recovery plans that address
the Company’s response to a cybersecurity incident and the recovery from a cybersecurity incident, and such plans are tested and evaluated
periodically.
●
Communication, Coordination and Disclosure: The Company utilizes a cross-functional approach to address the risk from cybersecurity
threats, involving management personnel from the Company’s technology, operations, legal, risk management, and other key business
functions, while also implementing controls and procedures for the escalation of cybersecurity incidents pursuant to established thresholds so
that decisions regarding the disclosure and reporting of such incidents can be made by management in a timely manner.
A key part of the Company’s
strategy for managing risks from cybersecurity threats is the ongoing assessment and testing of the Company’s
processes and practices
focused on evaluating the effectiveness of our cybersecurity measures. The Company engages third parties as appropriate to
perform assessments
of its cybersecurity measures. The results of such assessments and reviews are reported to the Company’s Board of Directors and
the
Company adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided by the
assessments, audits
and reviews.
Governance
The Company’s Audit
Committee receives updates on a quarterly basis from the Company’s IT Director regarding the progress of our annual and
long-term
work plan associated with managing risks from cybersecurity threats. The Company’s Board of Directors receives updates and presentations
on
cybersecurity risks at least once a year, which address a wide range of topics including, for example, recent developments, third-party
reviews, common
threats, technological trends and information security considerations arising with respect to the Company and discusses
the Company’s approach to
cybersecurity risk management with the Company’s management and IT Director. The Board of Directors
will receive prompt and timely information
regarding any significant cybersecurity incident, as well as ongoing updates regarding such
incident until it has been addressed.
123
The Company’s IT Director,
together with the assistance of the Company’s Information Security Compliance Officer (CISO), is principally
responsible for overseeing
the Company’s cybersecurity risk management program. The IT Director, in assistance with a team of external experts, works in
coordination
with the other members of management, including our Chief Executive Officer, Chief Financial Officer and General Counsel, to implement
a
program designed to protect the Company’s information systems from cybersecurity threats, to address cybersecurity threats and
to promptly respond to
any cybersecurity incidents in accordance with the Company’s incident response and recovery plans. Through
ongoing activities of this team, the IT
Director monitors the prevention, detection, mitigation and remediation of cybersecurity incidents
in real time, and reports such incidents to senior
management and the Board of Directors, when appropriate.
The Company’s IT Director
has served in various roles in information technology and information security for over 20 years, including at Rafael
Advanced Defense
Systems, Haifa Sea Port, Tara Dairy and HCT. The Company’s IT Director has a bachelor’s degree in information systems management
and business administration and is a Microsoft systems certified engineer.
To
date, no risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, which have not been material,
have
materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition.
However, an actual or
perceived breach of our cybersecurity could damage our reputation, subject us to third-party lawsuits, regulatory
fines or other actions or liabilities, any of
which could adversely affect our business, operating results or financial condition. For
further information, see “Item 3. Key Information – D. Risk Factors
– Risks Related to Our Industry – Our business
and operations would suffer in the event of computer system failures, cyber-attacks on our systems or
deficiency in our cyber security
measures.”
124
PART III
Item 17. Financial Statements
Consolidated Financial Statements
are set forth under Item 18.
Item 18. Financial Statements
Our Consolidated Financial
Statements beginning on pages F-1 through F-67, as set forth in the following index, are hereby incorporated herein
by reference.
These Consolidated Financial Statements are filed as part of this Annual Report.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 1281)
F-2 – F-6
Consolidated Financial Statements as of December 31, 2024:
Consolidated Statements of Financial Position
F-7
Consolidated Statements of Profit or Loss and Other Comprehensive Income
F-8
Consolidated Statements of Changes in Equity
F-9
Consolidated Statements of Cash Flows
F-10 – F-11
Notes to the Consolidated Financial Statements
F-12 – F-67
125
Item 19. Exhibits
Exhibit No. Description
1.1
Amended Articles of Association of the Registrant (incorporated by reference to Appendix A2 to the Proxy Statement for the 2016 Annual
General Meeting of Shareholders, filed as Exhibit 99.1 to Form 6-K filed with the Securities and Exchange Commission on July 26, 2016).
1.2
Memorandum of Association of the Registrant, as currently in effect (as translated from Hebrew) (incorporated by reference to Exhibit 3.1
of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).
2.1
Description of Securities
2.2
Form of Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form F-1 filed with the
Securities and Exchange Commission on May 15, 2013).
4.1†
Exclusive Manufacturing, Supply and Distribution Agreement, dated as of August 23, 2010, by and between Kamada Ltd. and Baxter
Healthcare Corporation (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form F-1 filed with the Securities and
Exchange Commission on May 15, 2013).
4.2†
Technology License Agreement, dated as of August 23, 2010, by and between Kamada Ltd. and Baxter Healthcare S.A. (incorporated by
reference to Exhibit 10.2 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).
4.3†
Amended and Restated Fraction IV-1 Paste Supply Agreement, dated as of August 23, 2010, by and between Kamada Ltd. and Baxter
Healthcare Corporation (incorporated by reference to Exhibit 10.3 of the Registration Statement on Form F-1 filed with the Securities and
Exchange Commission on April 11, 2013).
4.4†
First Amendment to the Amended and Restated Fraction IV-1 Paste Supply Agreement, dated as of May 10, 2011, by and between Kamada
Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.4 of the Registration Statement on Form F-1 filed with the
Securities and Exchange Commission on April 11, 2013).
4.5†
Second Amendment to the Amended and Restated Fraction IV-1 Paste Supply Agreement, dated as of June 22, 2011, by and between
Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.5 of the Registration Statement on Form F-1 filed
with the Securities and Exchange Commission on April 11, 2013).
4.6†
License Agreement, dated as of November 16, 2006, by and between PARI GmbH and Kamada Ltd. (incorporated by reference to Exhibit
10.7 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).
4.7†
Amendment No. 1 to License Agreement, dated as of August 9, 2007, by and between PARI GmbH and Kamada Ltd. (incorporated by
reference to Exhibit 10.8 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).
4.8†
Addendum No. 1 to License Agreement, dated as of February 21, 2008, by and between PARI Pharma GmbH and Kamada Ltd.
(incorporated by reference to Exhibit 10.9 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission
on April 11, 2013).
4.9†
Supply and Distribution Agreement, dated as of July 18, 2011, by and between Kamada Ltd. and Kedrion S.p.A. (incorporated by reference
to Exhibit 10.10 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).
126
4.10
English translation of form of Indemnification Agreement with the Registrant’s directors and officers (incorporated by reference to Exhibit
10.15 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).
4.11
English translation of amendment to form of Indemnification Agreement with the Registrant’s directors and officers (incorporated by
reference to Appendixes A3 and A4 of the Proxy filed as Exhibit 99.1 to Form 6-K filed with the Securities and Exchange Commission on
May 22, 2015).
4.12
English summary of two lease agreements dated June 20, 2002, by and between the Israel Lands Administration and Kamada Nehasim
(2001) Ltd., as such agreements were amended by lease agreement dated January 30, 2011, by and between the Israel Lands Authority and
Kamada Assets (2001) Ltd. (incorporated by reference to Exhibit 10.16 of the Registration Statement on Form F-1 filed with the Securities
and Exchange Commission on April 11, 2013).
4.13†
Fraction IV-1 Paste Supply Agreement, dated December 3, 2012, by and between Baxter Healthcare S.A. and Kamada Ltd. (incorporated
by reference to Exhibit 10.18 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11,
2013).
4.14
Side Letter Agreement, dated as of March 23, 2011, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by
reference to Exhibit 10.20 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15,
2013).
4.15
First Amendment to the Exclusive Manufacturing Supply and Distribution Agreement, dated as of September 6, 2012, between Kamada
Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.21 of the Registration Statement on Form F-1 filed with
the Securities and Exchange Commission on May 15, 2013).
4.16†
Second Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of May 14, 2013, by and between
Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.22 of the Registration Statement on Form F-1
filed with the Securities and Exchange Commission on May 15, 2013).
4.17†
First Amendment to the Technology License Agreement, dated as of May 14, 2013, by and between Kamada Ltd. and Baxter Healthcare
SA (incorporated by reference to Exhibit 10.23 of the Registration Statement on Form F-1 filed with the Securities and Exchange
Commission on May 28, 2013).
4.18†
Third Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of September 2014, by and between
Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 4.25 of the Annual Report on Form 20-F filed with
the Securities and Exchange Commission on April 28, 2015).
4.19†
Third Amendment to the Amended and Restated Fraction IV-1 Paste Supply Agreement executed on July 19, 2015 by and between Kamada
Ltd. and Baxalta U.S. Inc. (incorporated by reference to Exhibit 4.29 of the Annual Report on Form 20-F filed with the Securities and
Exchange Commission on February 25, 2016).
4.20†
Fourth Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of October, 2015, by and between
Kamada Ltd. and Baxalta U.S. Inc. (incorporated by reference to Exhibit 4.30 of the Annual Report on Form 20-F filed with the Securities
and Exchange Commission on February 25, 2016).
4.21†
Second Amendment to the Technology License Agreement, dated as of August 25, 2015, by and between Kamada Ltd. and Baxalta GmbH.
(incorporated by reference to Exhibit 4.31 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on
February 25, 2016).
4.22†
Fifth Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of October 5, 2016, by and between
Kamada Ltd. and Shire plc. (incorporated by reference to Exhibit 4.28 of the Annual Report on Form 20-F filed with the Securities and
Exchange Commission on March 1, 2017).
4.23
Compensation Policy for Executive Officers (incorporated by reference to Exhibit 4.23 of the Annual Report on Form 20-F filed with the
Securities and Exchange Commission on March 15, 2023).
4.24
Compensation Policy for Directors (incorporated by reference to Exhibit 4.24 of the Annual Report on Form 20-F filed with the Securities
and Exchange Commission on March 15, 2023).
4.25
Kamada Ltd. 2011 Israeli Share Award Plan (incorporated by reference to Exhibit 4.25 of the Annual Report on Form 20-F filed with the
Securities and Exchange Commission on March 15, 2023).
4.26
Kamada Ltd. 2011 Israeli Share Award Plan Appendix – U.S. Taxpayer. (incorporated by reference to Exhibit 4.26 of the Annual Report on
Form 20-F filed with the Securities and Exchange Commission on March 15, 2022).
4.27†
1st Addendum to Supply and Distribution Agreement dated October 15, 2016 between Kamada Ltd., and Kedrion S.p.A. (incorporated by
reference to Exhibit 4.32 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 1, 2017).
4.28†
2nd Addendum to Supply and Distribution Agreement dated October 11, 2018 between Kamada Ltd., and Kedrion S.p.A. (incorporated by
reference to Exhibit 4.29 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 27, 2019).
127
4.29†
Sixth Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of August 30, 2019, by and between
Kamada Ltd. and Baxalta U.S. Inc. (incorporated by reference to Exhibit 4.30 of the Annual Report on Form 20-F filed with the Securities
and Exchange Commission on February 26, 2020).
4.30†
Clinical Study Supply Agreement, dated as of May 5, 2019, by and between PARI GmbH and Kamada Ltd. (incorporated by reference to
Exhibit 4.31 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 26, 2020).
4.31
Share Purchase Agreement dated as of January 20, 2020, by and among Kamada Ltd. and the FIMI Funds (incorporated by reference to
Exhibit 99.2 to Form 6-K filed with the Securities and Exchange Commission on January 21, 2020).
4.32†
Registration Rights Agreement, dated as of January 20, 2020, by and among Kamada Ltd. and the FIMI Funds (incorporated by reference to
Exhibit 99.3 to Form 6-K filed with the Securities and Exchange Commission on January 21, 2020).
4.33†
Binding Term Sheet, dated as of April 27, 2020, between Kamada Ltd. and Kedrion S.p.A. (incorporated by reference to Exhibit 4.34 of the
Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 24, 2021)
4.34
Asset Purchase Agreement, dated January 31, 2021, by and among Kamada Plasma, LLC and Blood and Plasma Research, Inc
(incorporated by reference to Exhibit 4.35 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on
February 24, 2021)
4.35
Asset Purchase Agreement dated November 22, 2021, by and among Saol International Limited, Saol Bermuda Limited, Saol Therapeutics
Research Limited, Saol Therapeutics Inc., Saol US Inc., Kamada Limited and Kamada Inc. (incorporated by reference to Exhibit 99.2 to
Form 6-K filed with the Securities and Exchange Commission on November 22, 2021).
4.36†
Amended and Restated Manufacturing Services Agreement dated as of September 28, 2017, by and between Emergent BioSolutions, Inc.
and Aptevo Therapeutics Inc. (assumed by Kamada Ltd.) (incorporated by reference to Exhibit 4.37 of the Annual Report on Form 20-F
filed with the Securities and Exchange Commission on March 15, 2023)
4.37†
Contract Manufacturing, Services and Supply Agreement dated November 29, 2022, by and between Kamada Ltd. and Prothya
Biosolutions Belgium (incorporated by reference to Exhibit 4.38 of the Annual Report on Form 20-F filed with the Securities and Exchange
Commission on March 15, 2023)
4.38
Share Purchase Agreement dated May 23, 2023, by and among Kamada Ltd., FIMI Opportunity 7, L.P. and FIMI Israel Opportunity 7,
Limited Partnership (incorporated by reference to Exhibit 99.2 to Form 6-K filed with the Securities and Exchange Commission on May 24,
2023)
4.39
Amended and Restated Registration Rights Agreement dated May 23, 2023, by and among Kamada Ltd. and the FIMI Funds (incorporated
by reference to Exhibit 99.3 to Form 6-K filed with the Securities and Exchange Commission on May 24, 2023)
4.40†
Memorandum of Understandings dated December 4, 2023, by and among Kamada Ltd., and Kedrion Biopharma Inc. (incorporated by
reference to Exhibit 99.2 to Form 6-K filed with the Securities and Exchange Commission on December 6, 2023)
4.41†
Fifth Amendment to the Supply and Distribution Agreement, by and between Kamada Ltd. and Kedrion Biopharma Inc., dated January 1,
2025.
4.42†
Lease Agreement by and between TCP Las Palmas Partners, Ltd. and Kamada Plasma, LLC, dated May 2, 2024.
4.43†
Lease Agreement by and between BRIXMOR HOLDINGS 12 SPE, LLC, and Kamada Plasma, LLC, dated March 7, 2023.
8.1
Subsidiaries of the Registrant.
11.1
Insider Trading Policy
12.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
12.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
13.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
15.1
Consent of EY Global, independent registered public accounting firm.
97.1
Kamada Ltd. Compensation Recoupment Policy
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
†
Portions of this exhibit have been omitted.
128
SIGNATURES
The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this
annual report on its behalf.
KAMADA LTD.
By:
/s/ Chaime Orlev
Chaime Orlev
Chief Financial Officer
Date: March 5, 2025
129
Kamada Ltd. and Subsidiaries
Consolidated Financial
Statements as of December 31, 2024
Table of Contents
Page
Report of Independent Registered Public Accounting
Firm (PCAOB ID: 1281)
F-2 – F-6
Consolidated Statements of Financial Position
F-7
Consolidated Statements of Profit or Loss and Other
Comprehensive Income
F-8
Consolidated Statements of Changes in Equity
F-9
Consolidated Statements of Cash Flows
F-10 – F-11
Notes to the Consolidated Financial Statements
F-12 – F-67
- - - - - - - - - - -
F-1
Kamada Ltd. and subsidiaries
Kost Forer Gabbay & Kasierer
Tel: +972-3-6232525
144 Menachem Begin Road,
Fax: +972-3-5622555
Building A
ey.com
Tel-Aviv 6492102, Israel
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors
of
Kamada Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial
position of Kamada Ltd. and subsidiaries (the Company) as of December 31, 2024
and 2023, the related consolidated statements of profit
or loss and other comprehensive income, changes in equity and cash flows for each of the three
years in the period ended December 31,
2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and
the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with
International Financial
Reporting Standards as issued by the International Accounting Standard Board.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting
as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) and our report dated March 5, 2025 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our
audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below
are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our
especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing
separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Kost Forer Gabbay & Kasierer
Tel: +972-3-6232525
144 Menachem Begin Road,
Fax: +972-3-5622555
Building A
ey.com
Tel-Aviv 6492102, Israel
Valuation of goodwill in the proprietary segment
Description of the
Matter
As discussed in Note 10 to the consolidated financial
statements, as of December 31, 2024, the Company has a
goodwill of USD 30.3 million which is related to the proprietary segment. The Company
tests the goodwill for
impairment at least annually on December 31 at the single operating segment level (one cash-generating unit
(CGU)),
which is the level at which goodwill is monitored for internal management purposes. The Company
performed a quantitative impairment analysis
as of December 31, 2024, estimating the fair value of the proprietary
segment by utilizing an income approach that uses the discounted
cash flow (“DCF”) analysis. As part of the
Company’s analysis of its goodwill, the results of this test indicated that
the estimated fair value exceeded the
carrying value as of December 31, 2024.
Auditing the Company’s goodwill impairment
test was complex due to the significant judgement involved and
required the involvement of specialist in determining the fair value of
the proprietary segment. In particular, the fair
value estimate was sensitive to significant assumptions that require judgment, including
the amount and timing of
future cash flows (e.g., revenue growth rates and gross margin), long-term growth rates, and the discount rate.
These
assumptions are affected by factors such as expected future market or economic conditions.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated, and tested
the design and operating effectiveness of internal controls over
the Company’s goodwill impairment review process. We tested controls
over management’s review of the valuation
model and the significant assumptions, as discussed above, used to develop the prospective
financial information.
We also tested management’s controls to validate that the data used in the valuation was complete and accurate.
To test the estimated fair value of the Company’s
proprietary segment, we performed audit procedures that included,
among others, testing management’s process for developing the
fair value estimate; evaluating the appropriateness
of the discounted cash flow model; testing the completeness, accuracy, and relevance
of underlying data used in the
model; and evaluating the significant assumptions as mentioned above. Evaluating management’s assumptions
related to future cash flows involved evaluating whether the assumptions used by management were reasonable
considering (i) the current
and past performance of the proprietary segment, (ii) the consistency with external market
and industry data, (iii) sensitivities over
significant inputs and assumptions and (iv) whether these assumptions were
consistent with evidence obtained in other areas of the audit.
We also involved our valuation specialists in assisting
with our evaluation of the methodology used by the Company and the significant
assumptions included in the fair
value estimates.
F-3
Kost Forer Gabbay & Kasierer
Tel: +972-3-6232525
144 Menachem Begin Road,
Fax: +972-3-5622555
Building A
ey.com
Tel-Aviv 6492102, Israel
Valuation of the provision of sales rebates, and wholesaler chargebacks liabilities (the “Rebates”) in the United
States
Description of the
Matter
As discussed in Note 2l to the consolidated financial
statements, following the acquisition of a portfolio of four
FDA-approved plasma derived hyperimmune commercial products, the Company
sells these products mainly within
the U.S markets through its subsidiary Kamada Inc. to wholesalers/distributors. The Company’s
gross sales are
subject to various deductions, which are primarily composed of rebates to group purchasing organizations,
government agencies,
wholesalers, health insurance companies and managed healthcare organizations. These rebates
represent estimates of the related obligations,
requiring the use of judgment when estimating the effect of these
rebates on gross sales for a reporting period.
Auditing the provision of the rebates related
to the U.S markets is complex because of the subjectivity of certain
assumptions and judgments required to develop estimates. These significant
assumptions and judgments include
consideration of historical claims, experience, payer channel mix, current contract prices, unbilled
claims, and
claims submissions time lags. Additionally, auditing this matter is challenging given the Company’s limited
availability
of historical sales and rebate data for these products.
How We Addressed the
Matter in Our Audit
We evaluated the design and tested the operating
effectiveness of certain internal controls over the Company’s
rebates provision process. We obtained an understanding of the Company’s
process to estimate the provision for
rebates.
We performed substantive test procedures related
to the rebates, which included testing the significant assumptions
and mathematical accuracy. We tested the completeness of the data used
in the estimates and developed expectations
of the key inputs using independent sources. To address the completeness of the provision,
we also assessed the
historical accuracy of management’s estimates by comparing actual activity to previous estimates and performing
analytical procedures. Finally, we considered subsequent events and any new information after the financial
statement date that would
require an adjustment to the provision.
F-4
Kost Forer Gabbay & Kasierer
Tel: +972-3-6232525
144 Menachem Begin Road,
Fax: +972-3-5622555
Building A
ey.com
Tel-Aviv 6492102, Israel
Valuation of Inventory
Description of the
Matter
As of December 31, 2024, the Company’s inventory
totaled $78.8 million. As described in Notes 2d and Note 8 to
the consolidated financial statements, inventory is comprised of raw materials,
work-in-progress, and finished goods
relating to both the Proprietary and Distribution segments. The value of work in progress and finished
goods related
to the Proprietary segment includes direct and indirect costs.
As part of the quarterly inventory valuation process,
the Company assesses the potential effect on inventory in cases
of deviations from quality standards in the manufacturing process to identify
potential required inventory write offs.
Auditing the valuation of the Company’s
inventory was complex and involved subjective auditor judgment because
of the significant assumptions management makes to determine the
inventory write-offs as a result from deviations
from quality standards. Management’s determination of deviations from quality standards
is based on qualitative
assessment, historical data and the Company’s past experience.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated, and tested
the design and operating effectiveness of internal controls over
the Company’s inventory valuation process, including controls over
the assessment of required write offs due to
deviations from quality standards, and the completeness and accuracy of underlying data and
assumptions.
To test management’s assessment of required
write offs due to deviation from quality standards, our audit procedures
included, among others, obtaining the deviations analysis reports
from management and evaluating their
appropriateness by comparing with historical data. We also held discussions with Company personnel
to understand
the judgments and qualitative factors considered in their analysis.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
We have served as the Company’s auditor since 2005.
Tel-Aviv, Israel
March 5, 2025
F-5
Kamada Ltd. and subsidiaries
Kost Forer Gabbay & Kasierer
Tel: +972-3-6232525
144 Menachem Begin Road,
Fax: +972-3-5622555
Building A
ey.com
Tel-Aviv 6492102, Israel
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Shareholders and the Board of Directors of
Kamada Ltd.
Opinion on Internal Control Over Financial
Reporting
We have audited Kamada Ltd. and subsidiaries’
internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO
criteria). In our
opinion, Kamada Ltd. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (PCAOB), the consolidated
statements of financial position of the Company as of December
31, 2024 and 2023, the related consolidated statements of profit or loss and other
comprehensive income, changes in equity and cash flows
for each of the three years in the period ended December 31, 2024, and the related notes and our
report dated March 5, 2025 expressed
an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included
in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control
Over Financial Reporting
A company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance
with the policies or procedures may deteriorate.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
Tel-Aviv, Israel
March 5, 2025
F-6
Kamada Ltd. and subsidiaries
Consolidated Statements of Financial Position
As of December 31,
2024
2023
Note
U.S. Dollars in thousands
Assets
Current Assets
Cash and cash equivalents
5
$
78,435 $
55,641
Trade receivables, net
6
21,547
19,877
Other accounts receivables
7
5,546
5,965
Inventories
8
78,819
88,479
Total Current Assets
184,347
169,962
Non-Current Assets
Property, plant and equipment, net
9
36,245
28,224
Right-of-use assets
14
9,617
7,761
Intangible assets and other long-term assets
10
103,226
110,152
Goodwill
10
30,313
30,313
Contract asset
10
8,019
8,495
Deferred taxes
21
488
-
Total Non-Current Assets
187,908
184,945
Total Assets
$
372,255 $
354,907
Liabilities
Current Liabilities
Current maturities of lease liabilities
14
1,631
1,384
Current maturities of other long term liabilities
13
10,181
14,996
Trade payables
11
27,735
24,804
Other accounts payables
12
9,671
8,261
Deferred revenues
171
148
Total Current Liabilities
49,389
49,593
Non-Current Liabilities
Lease liabilities
14
9,431
7,438
Contingent consideration
13a
20,646
18,855
Other long-term liabilities
13a
32,816
34,379
Employee benefit liabilities, net
16
509
621
Total Non-Current Liabilities
63,402
61,293
Shareholder’s Equity
19
Ordinary shares
15,028
15,021
Additional paid in capital net
266,933
265,848
Capital reserve due to translation to presentation currency
(3,490)
(3,490)
Capital reserve from hedges
51
140
Capital reserve from share-based payments
6,316
6,427
Capital reserve from employee benefits
364
275
Accumulated deficit
(25,738)
(40,200)
Total Shareholder’s Equity
259,464
244,021
Total Liabilities and Shareholder’s Equity
$
372,255 $
354,907
The accompanying notes are an integral part of the Consolidated Financial
Statements.
F-7
Kamada Ltd. and subsidiaries
Consolidated Statements of Profit or Loss and Other Comprehensive
Income
For the Year Ended
December 31,
2024
2023
2022
Note
U.S. Dollars in thousands,
except for share and per share data
Revenues from proprietary products
1a
$
141,447 $
115,458 $
102,598
Revenues from distribution
19,506
27,061
26,741
Total revenues
22a,b
160,953
142,519
129,339
Cost of revenues from proprietary products
73,708
63,342
58,229
Cost of revenues from distribution
17,278
23,687
24,407
Total cost of revenues
22c
90,986
87,029
82,636
Gross profit
69,967
55,490
46,703
Research and development expenses
22d
15,185
13,933
13,172
Selling and marketing expenses
22e
18,428
16,193
15,284
General and administrative expenses
22f
15,702
14,381
12,803
Other expense
601
919
912
Operating income
20,051
10,064
4,532
Financial income
22g
2,118
588
91
Income (expenses) in respect of currency exchange differences and derivatives
instruments, net
22g
(94)
55
298
Revaluation of long-term liabilities
15
(8,081)
(980)
(6,266)
Financial expense
22g
(660)
(1,298)
(914)
Income before tax on income
13,334
8,429
(2,259)
Taxes on income
21
1,128
(145)
(62)
Net Income (Loss)
$
14,462
8,284
(2,321)
Other Comprehensive Income:
Amounts that will be or that have been reclassified to profit or loss when
specific conditions are met, net of tax
Gain (loss) on cash flow hedges
(30)
(186)
(776)
Net amounts transferred to the statement of profit or loss for cash flow hedges
(59)
414
634
Items that will not be reclassified to profit or loss in subsequent periods:
Remeasurement gain (loss) from defined benefit plan
89
(73)
497
Total comprehensive income (loss)
$
14,462 $
8,439 $
(1,966)
Earnings per share attributable to equity holders of the Company:
23
Basic net earnings (loss) per share
$
0.25 $
0.17 $
(0.05)
Diluted net earnings per (loss) share
$
0.25 $
0.15 $
(0.05)
The accompanying notes are an integral part of the Consolidated Financial
Statements.
F-8
Kamada Ltd. and subsidiaries
Consolidated Statements of Changes in Equity
Share
capital
Additional
paid in
capital
Capital
reserve
due
to
translation to
presentation
currency
Capital
reserve
from
hedges
Capital
reserve
from
share
based
payments
Capital
reserve
from
employee
benefits
Accumulated
deficit
Total
equity
U.S. Dollars in thousands
Balance as of December 31,
2021
$
11,725 $
210,204 $
(3,490) $
54 $
4,643 $
(149) $
(46,163) $
176,824
Net income (loss)
(2,321)
(2,321)
Other comprehensive income
(loss)
-
-
-
(142)
-
497
-
355
Total comprehensive income
(loss)
-
-
-
(142)
-
497
(2,321)
(1,966)
Exercise and forfeiture of
share-based payment into
shares
9
291
-
-
(291)
-
-
9
Cost of share-based payment
-
-
-
-
1,153
-
-
1,153
Balance as of December 31,
2022
$
11,734 $
210,495 $
(3,490) $
(88) $
5,505 $
348 $
(48,484) $
176,020
Net income (loss)
8,284
8,284
Other comprehensive income
(loss)
-
-
-
228
-
(73)
-
155
Total comprehensive income
(loss)
-
-
-
228
-
(73)
8,284
8,439
Issuance of shares
3,283
54,948
-
-
-
-
-
58,231
Exercise and forfeiture of
share-based payment into
shares
4
405
(405)
4
Cost of share-based payment
-
-
-
-
1,327
-
-
1,327
Balance as of December 31,
2023
$
15,021
265,848 $
(3,490) $
140 $
6,427 $
275 $
(40,200) $
244,021
Net income (loss)
14,462
14,462
Other comprehensive income
(loss), net of
tax
-
-
-
(89)
-
89
-
-
Total comprehensive income
(loss)
-
-
-
(89)
-
89
14,462
14,462
Exercise and forfeiture of
share-based payment into
shares
7
985
-
-
(985)
-
-
7
Cost of share-based payment
-
-
-
-
874
-
-
874
Income tax impact associated
with issuance of shares
-
100
-
-
-
-
-
100
Balance as of December 31,
2024
$
15,028 $
266,933 $
(3,490) $
51 $
6,316 $
364 $
(25,738) $
259,464
The accompanying notes are an integral part of
the Consolidated Financial Statements.
F-9
Kamada Ltd. and subsidiaries
Consolidated Statements of Cash Flows
For the year ended
December 31,
2024
2023
2022
Note
U.S. Dollars in thousands
Cash Flows from Operating Activities
Net
income (loss)
$
14,462 $
8,284 $
(2,321)
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization
9,10,14
13,808
12,714
12,155
Financial expense, net
6,717
1,635
6,791
Cost of share-based payment
20
874
1,314
1,153
Taxes on income
22
(1,128)
145
62
Loss (gain) from sale of property and equipment
11
(5)
-
Change in employee benefit liabilities, net
52
(125)
(111)
20,334
15,678
20,050
Changes in asset and liability items:
Decrease (increase) in trade receivables, net
(1,977)
7,835
7,603
Decrease (increase) in other accounts receivables
593
(1,150)
(578)
Decrease (increase) in inventories
9,659
(19,694)
(1,361)
Decrease (increase) in contract asset
476
2,814
(1,340)
Increase (decrease) in trade payables
1,226
(8,885)
7,055
Increase in other accounts payables
1,413
765
290
Increase (decrease) in deferred revenues
23
113
(20)
11,413
(18,202)
11,649
Cash (paid) received during the year for:
Interest paid
(594)
(1,228)
(853)
Interest received
2,118
-
97
Taxes paid
(139)
(217)
(36)
1,385
(1,445)
(792)
Net cash provided by operating activities
$
47,594 $
4,315 $
28,586
The accompanying notes are an integral part of
the Consolidated Financial Statements.
F-10
Kamada Ltd. and subsidiaries
Consolidated Statements of Cash Flows
For the year ended
December
31,
2024
2023
2022
Note
U.S. Dollars in thousands
Cash Flows from Investing Activities
Purchase of property and equipment and intangible assets
9
$
(10,740) $
(5,850) $
(3,784)
Proceeds from sale of property and equipment
1
7
-
Net cash used in investing activities
(10,739)
(5,843)
(3,784)
Cash Flows from Financing Activities
Proceeds from exercise of share base payments
7
4
9
Proceeds from issuance of ordinary shares, net
20f
-
58,231
-
Repayment of lease liabilities
(1,251)
(850)
(1,098)
Repayment of long-term loans
-
(17,407)
(2,628)
Repayment of other long-term liabilities
(12,667)
(17,300)
(5,626)
Net cash provided by (used in) financing activities
(13,911)
22,678
(9,343)
Exchange differences on balances of cash and cash equivalent
(150)
233
212
Increase in cash and cash equivalents
22,794
21,383
15,671
Cash and cash equivalents at the beginning of the
year
55,641
34,258
18,587
Cash and cash equivalents at the end of the year
$
78,435 $
55,641 $
34,258
Significant non-cash transactions
Right-of-use asset recognized with corresponding lease liability
15
$
3,304 $
6,546 $
551
Purchase of property and equipment in credit
$
1,955 $
646 $
618
The accompanying notes are an integral part of
the Consolidated Financial Statements.
F-11
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 1: - General
General description of the Company and its activity
Kamada
Ltd (the “Company”) is a global biopharmaceutical company with a portfolio of marketed products indicated for rare and serious
conditions and a leader in the specialty plasma-derived therapies field. The Company’s strategy is focused on driving profitable
growth through
four primary growth pillars: First, organic growth from its commercial activities, including continued investment in the
commercialization and life
cycle management of its proprietary products, which include six FDA-approved specialty plasma-derived products:
KEDRAB®, CYTOGAM®,
GLASSIA®, WINRHO SDF®, VARIZIG® and HEPAGAM B® , as well as KAMRAB®, KAMRHO (D)® and
two types of equine-based anti-
snake venom products, and the products in the Distribution segment portfolio, mainly through the launch
of several biosimilar products in Israel.
Second, the Company aims to secure significant new business development, in-licensing,
collaboration and/or merger and acquisition
opportunities, which are anticipated to enhance the Company’s
marketed products portfolio and leverage its financial strength and existing
commercial infrastructure to drive long-term growth. Third,
the Company is expanding its plasma collection operations to support revenue growth
through the sale of normal source plasma to other
plasma-derived manufacturers, and to support its increasing demand for hyper-immune plasma.
The Company currently owns two operating plasma
collection centers in the United States, in Beaumont Texas and Houston Texas, and plans to
open the third center in San Antonio, Texas,
by the end of the first quarter of 2025. Lastly, the Company is leveraging its manufacturing, research
and development expertise to advance
the development and commercialization of additional product candidates, targeting areas of significant
unmet medical need, with its lead
product candidate Inhaled AAT, for which the Company is continuing to progress the InnovAATe clinical trial, a
randomized, double-blind,
placebo-controlled, pivotal Phase 3 trial.
In November 2021, the Company acquired,
pursuant to an Asset Purchase Agreement, CYTOGAM, WINRHO SDF, VARIZIG and HEPGAM B
from Saol Therapeutics Ltd. (“Saol” and
“Saol APA”). The acquisition of this portfolio furthered the Company’s core objective to become a fully
integrated specialty
plasma company with strong commercial capabilities in the U.S. market, as well as to expand to new markets, mainly in the
Middle East/North
Africa region, and to broaden the Company’s portfolio offering in existing markets. The Company’s wholly owned U.S.
subsidiary,
Kamada Inc., is responsible for the commercialization of the four products in the U.S. market, including direct sales to wholesalers and
local distributers.
In accordance with an agreement with Takeda
Pharmaceuticals Company Limited (“Takeda”), starting from the first quarter of 2022, Takeda pays
the Company royalties on
sales of GLASSIA manufactured by Takeda in the United States and, commencing in 2024, in Canada, at a rate of 12%
on net sales through
August 2025 and at a rate of 6% thereafter until 2040, with a minimum of $5 million annually for each year from 2022 to
2040. The Company
will also be entitled to royalty income on sales of GLASSIA by Takeda in Australia and New Zealand, to the extent that
GLASSIA will be
approved, and sales will be generated in these markets by Takeda in the future. Refer to Note 17 for further details on the
engagement
with Takeda.
F-12
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 1: - General (Cont.)
General description of the Company and its activity (cont.)
The Company’s ordinary shares are
listed for trading on the Tel Aviv Stock Exchange and the NASDAQ Global Select Market.
FIMI Opportunity Funds (“FIMI”),
the leading private equity firm in Israel beneficially owns approximately 38% of the Company’s outstanding
ordinary shares and is
a controlling shareholder of the Company; within the meaning of the Israeli Companies Law, 1999. Refer to Note 19f for
further details.
The Company’s activity is divided
into two operating segments:
Proprietary Products
Manufacturing, sales and distribution of plasma-derived
protein therapeutics.
Distribution
Distribute imported drug products in Israel, which are manufactured
by third parties.
The Company has four wholly-owned subsidiaries
– Kamada Inc., Kamada Plasma LLC (wholly owned by Kamada Inc.), KI Biopharma LLC and
Kamada Ireland Limited. In addition, the Company
owns 74% of Kamada Assets Ltd. (“Kamada Assets”).
F-13
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies
a.
Basis of presentation of financial statements
1.
These financial statements have been prepared in accordance with IFRS
Accounting Standards as issued by the International
Accounting Standard Board.
2.
Measurement basis:
The Company’s consolidated financial
statements are prepared on a cost basis, except for financial assets and liabilities
(including derivatives and contingent consideration)
which are measured at fair value through profit or loss (See Note 15).
The Company has elected to present
profit or loss items using the “function of expense” method.
b.
The Company’s operating cycle is one year.
c.
Functional currency, presentation currency and foreign currency
1.
Functional currency and presentation currency
The consolidated financial statements
are presented in U.S. dollars, which is the Company’s functional and presentation
currency.
2.
Transactions, assets and liabilities in foreign currency
Transactions denominated in foreign
currency are recorded on initial recognition at the exchange rate at the date of the
transaction. After initial recognition, monetary
assets and liabilities denominated in foreign currency are translated at the end of
each reporting period into the functional currency
at the exchange rate at that date. Exchange differences are recognized in profit
or loss. Non-monetary assets and liabilities measured
at cost in a foreign currency are translated at the exchange rate at the date
of the transaction.
F-14
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
d.
Inventories
Inventories are measured at the lower of cost and net realizable value.
The cost of inventories comprises of the costs of purchase of raw
and other materials and costs incurred in bringing the inventories to
their present location and condition. Net realizable value is the
estimated selling price in the ordinary course of business, net of selling
expenses.
Cost of inventories is determined as
follows:
Raw materials
At cost using the first-in, first-out method.
Work in process
Costs of raw materials, direct and indirect costs
including labor, other materials and other indirect
manufacturing costs allocated to the in process manufactured batches through the end
of the reporting period.
The allocation of indirect costs is accounted for on a quarterly basis by dividing the total quarterly indirect
manufacturing cost to the batches manufactured during that quarter based on predetermined allocation factors.
The Company determines a standard manufacturing
capacity for each quarter. To the extent the actual
manufacturing capacity in a given quarter is lower than the predetermined standard,
than a portion of the
indirect costs which is equal to the product of the overall quarterly indirect costs multiplied by the quarterly
manufacturing shortfall rate is recognized as costs of revenues
Finished products
Costs of raw materials, direct and indirect costs including labor, other materials and other indirect
manufacturing costs allocated to the manufactured finished products through completion of manufacturing
process.
Purchased products
At cost using the first-in, first-out method.
The Company periodically evaluates the condition and age of inventories
and accounts for impairment of inventories with a lower net
realizable value or which are slow moving.
e.
Financial instruments
1.
Financial assets
The Company’s portfolio of financial
assets consists mainly of trade receivables and bank deposits. The objective of the
business model for managing the Company’s financial
instruments is to collect the amounts due from them, and for bank
deposits to earn contractual interest income on the amounts collected.
All of the Company’s financial assets’ contractual cash
flows represent solely payments of principal and interest (SPPI).
Thus, the Company accounts for its financial assets under the
amortized cost model. For those financial assets, the Company analyzes
each material customer’s balance individually to
evaluate and measure the expected credit losses (“ECLs”) of its trade
receivables. Loss rates are based on actual credit loss
experience, adjusted for current conditions and the Company’s view of the
economic conditions over the expected lives of the
trade receivables
F-15
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
e.
Financial instruments (cont.)
2.
Financial liabilities
Financial liabilities within the scope
of IFRS 9 are initially measured at fair value less transaction costs that are directly
attributable to the issuance of the financial
liability.
After initial recognition, the accounting
treatment of financial liabilities is based on their classification as follows:
a)
Financial liabilities measured at amortized cost
Loans and assumed liabilities, including
liabilities for future payment of royalties, are measured based on their terms at
amortized cost using the effective interest method considering
directly attributable transaction costs. Reassessment of
cash flows arising from assumed financial liabilities is recognized as finance
income or expense in the statement of
operations.
b)
Financial liabilities measured at fair value
Derivatives are classified as fair
value through profit and loss unless they are designated as effective hedging
instruments (see below). Transaction costs are recognized
in profit or loss.
After initial recognition, changes
in fair value are recognized either in income (expenses) in respect of currency
exchange differences and derivatives instruments line
item for non-hedge accounting derivatives or in other
comprehensive income for hedge accounting derivatives.
Contingent consideration in a business combination
Contingent consideration recognized
in a business combination is classified as a financial liability in accordance with
IFRS 9.
Contingent consideration is measured
at fair value. The fair value is determined using valuation techniques and method,
using future cash flows discounted. Subsequent changes
in the fair value of the contingent consideration are recognized
in profit or loss as finance income or finance expense.
f.
Derivative financial instruments designated as hedges
The Company enters into contracts
for derivative financial instruments such as forward currency contracts and cylinder strategy in
respect of foreign currency to hedge
risks associated with foreign exchange rates fluctuations and cash flows risk. Such derivative
financial instruments are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is
negative.
At the inception of a hedge relationship,
the Company formally designates and documents the hedge relationship to which the Company
wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The hedge effectiveness is
assessed at the end of each reporting period.
Any gains or losses arising from
changes in the fair value of derivatives that do not qualify for hedge accounting are recorded in profit or
loss.
Cash flow hedges
The effective portion of the gain
or loss on the hedging instrument is recognized as other comprehensive income (loss), while any
ineffective portion is recognized immediately
in profit or loss.
Amounts recognized as other comprehensive
income (loss) are reclassified to profit or loss when the hedged transaction affects profit or
loss, such as when the hedged income or
expense is recognized or when a forecast payment occurs.
g.
Property, plant and equipment
Property, plant and equipment are measured
at cost, including directly attributable costs, less accumulated depreciation excluding day-to-
day servicing expenses. Cost includes spare
parts and auxiliary equipment that can be used only in connection with the plant and
equipment.
The cost of assets includes the cost
of materials, direct labor costs, as well as any costs directly attributable to bringing the asset to the
location and condition necessary
for it to operate in the manner intended by management.
F-16
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
g.
Property, plant and equipment (cont.)
The Company’s assets include
computer systems comprising hardware and software. Software forming an integral part of the hardware to
the extent that the hardware
cannot function without the software installed on it is classified as property, plant and equipment.
Depreciation is calculated on a straight-line
basis over the useful life of the assets at annual rates as follows:
%
Mainly
%
Buildings
2.5-4
4
Machinery and equipment
10-20
15
Vehicles
15
15
Computers, software, equipment and office furniture
6-33
33
Leasehold improvements
(*)
10
(*) Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term (including the extension option held by the
Company and intended to be exercised) and the expected life of the improvement.
h.
Leases
The Company leases lands, facilities dedicated
for office space plasma collection centers and storage spaces, vehicles and office
equipment (see Note 14).
For leases in which the Company is the
lessee, it recognizes a right-of-use asset and a lease liability on the commencement date of the
lease. The Company has elected to apply
the recognition exemption for leases which the lease term is up to 12 months and for leases for
which the underlying asset is of low value.
For these excluded leases, the Company recognizes the lease payments as an expense in profit
or loss on a straight-line basis over the
lease term.
In measuring the lease liability, the
Company has elected to apply the practical expedient and does not separate the lease components
from the non-lease components (such as
management and maintenance services, etc.). On the commencement date, the lease liability
includes all unpaid lease payments discounted
at the interest rate implicit in the lease, if that rate can be readily determined, or otherwise
using the Company’s incremental
borrowing rate. The Company determines the incremental borrowing rate based on its credit risk, the
lease term and other economic variables
deriving from the lease contract’s conditions and restrictions. After the commencement date, the
Company measures the lease liability
using the effective interest rate method.
The right-of-use asset is measured applying
the cost model and depreciated over the shorter of its useful life or the lease term, as follows:
%
Mainly
%
Land and Buildings
4-10
10
Vehicles
20-33
33
office equipment (i.e. printing and photocopying machines)
20
20
Variable lease payments that depend on an index:
For leases in which the Company is the lessee, the aggregate
changes in future lease payments resulting from a change in the index are
discounted (without a change in the discount rate applicable
to the lease liability) and recorded as an adjustment of the lease liability and
the right-of-use asset, only when there is a change in
the cash flows resulting from the change in the index (that is, when the adjustment
to the lease payments takes effect).
Lease modifications:
Most of the Company’s lease
modifications are for the extension of existing lease contracts, as such, these modifications do not reduce
the scope of the lease or
result in a separate lease. Under those modifications, the Company re-measures the lease liability based on the
modified lease terms
using a revised discount rate as of the modification date and records the change in the lease liability as an
adjustment to the right-of-use
asset.
F-17
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
i.
Intangible assets
Separately acquired intangible assets
are measured on initial recognition at cost including directly attributable costs. Intangible assets
acquired in a business combination
are measured at fair value at the acquisition date.
Intangible assets with a finite useful
life are amortized on a straight-line basis over their useful life, as follows:
Estimated life
Amortization method
Intellectual property
15-20
Straight-line
Customer Relations
20
Straight-line
Production agreement
6
Straight-line
Distribution right
10-15
Straight-line over the contract period
Goodwill
Indefinite
Not amortized
For additional information regarding
intangible assets, see Note 10.
j.
Impairment of non-financial assets
The Company reviews the carrying amount
of non-financial assets (other than inventories, contract assets and deferred tax assets), at each
reporting date, to determine whether
there is any indication of impairment. If any such indication exists, then the assets’ recoverable
amount is estimated. If the carrying
amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their
recoverable amount.
Goodwill is evaluated for potential impairment
on an annual basis, on December 31 of each year, or more frequently if events or changes
in circumstances indicate that there is a potential
impairment. The Company’s goodwill is attributed to the Proprietary Products segment,
which represents the lowest level within the
Company at which goodwill is monitored for internal management purposes (see Note 10).
Goodwill is evaluated for impairment by
assessing the recoverable amount of the CGU (or group of CGUs) to which the goodwill has
been allocated. An impairment loss is recognized
if the recoverable amount of the CGU (or group of CGUs) to which goodwill has been
allocated is less than the carrying amount of the CGU
(or group of CGUs). Any impairment loss is allocated first to goodwill. Impairment
losses recognized for goodwill cannot be reversed in
subsequent periods.
In the years ended December 31, 2024,
and 2023, the Company did not recognize impairment losses for goodwill.
k.
Employee benefit liabilities
The Company has several employee
benefit plans:
1.
Short-term employee benefits
Short-term employee benefits including
salaries, paid annual leave, paid sick leave, recreation, and social security contributions,
are recognized as expenses as the services
are rendered. A liability in respect of a cash bonus is recognized when the Company
has a legal or constructive obligation to make such
payment due to past service rendered by an employee and a reliable estimate
of the amount can be made.
2.
Post-employment benefits
Post-employment benefits plans are typically
financed by contributions to pension funds or similar entities, such as insurance
companies, and are classified as defined contribution
plans or defined benefit plans.
With respect to its employees in Israel,
the Company has defined contribution plans pursuant to Section 14 to the Israeli
Severance Pay Law, 1963 (the “Israeli Severance
Pay Law”), under which the Company pays fixed contributions to certain
employees under Section 14 and will have no legal or constructive
obligation to pay further contributions.
Contributions to the defined contribution
plan in respect of severance or retirement pay are recognized as an expense when
contributed concurrently with performance of the employee’s
services.
F-18
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
k.
Employee benefit liabilities (cont.)
In addition, with respect to certain
other Israeli based employees who were hired prior to the establishment of the defined contribution
plans pursuant to Section 14 to the
Israeli Severance Pay Law, the Company operates a defined benefit plan in respect of severance pay
pursuant to the Israeli Severance Pay
Law. According to the Israeli Severance Pay Law, employees are entitled to severance pay upon
dismissal or retirement. The liability for
termination of employment is measured using the projected unit credit method. The actuarial
assumptions include expected salary increases
and rates of employee’s turnover based on the estimated timing of payment. The amounts
are presented based on discounted expected
future cash flows using a discount rate determined by reference to market yields at the
reporting date on high quality corporate bonds
that are linked to the Israeli Consumer Price Index with a term that is consistent with the
estimated term of the severance pay obligation.
In respect of its defined benefit plan
obligation, the Company makes current deposits to pension funds or similar entities, such as
insurance companies, (“plan assets”).
Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available
to the Company’s own creditors and cannot be returned directly to the Company. The liability for
employee benefits shown in the
statement of financial position reflects the present value of the defined benefit obligation less the fair
value of the plan assets.
U.S. employees defined contribution
plan:
Since August 2022, Kamada Inc., the Company’s
U.S. wholly owned subsidiary has a 401(k) defined contribution plan covering certain
employees in the United States. All eligible employees
may elect to contribute up to 100% of their annual compensation to the plan
through salary deferrals, subject to Internal Revenue
Service limits. For the year ended December 31, 2024, the contribution limit was
$23,000 per year (for certain employees over 50 years
of age the maximum contribution was $30,500 per year). The U.S. subsidiary
matches 3% of employee contributions up to the combined maximum
employee and employer contributions totaling $69,000 (for certain
employees over 50 years of age the maximum contribution was $76,500
per year).
l.
Revenue recognition
The Company’s main source of revenue
is from the sale of products to strategic partners and distributors through the entering into sales
and distribution agreements. In addition,
and commencing from 2022, the Company also generates revenue in the form of royalties
received under a license agreement that grant the
use of the Company’s knowhow and patents. Under the royalty exception, revenue is
recognized when the underlying sales have occurred.
The Company assesses, on the inspection
date, the goods or services to be provided under the sales and distribution agreements with its
customers and identifies its performance
obligations under such agreements. In order to identify distinct performance obligations, the
Company examines whether it provides a significant
service of integrating the goods or services in the contract into one integrated
outcome.
Performance obligations are met when the customer can benefit from
the good or service either on its own or together with other
resources that are readily available to the customer and the Company’s
obligation to transfer such goods or services is separately
identifiable from other obligations in the agreement. The Company recognizes
revenue from agreements with customers at a point in time
when control of the Company’s product is transferred to the customer,
generally on delivery of the goods according to the shipment
terms.
The Company determines the transaction
price separately for each agreement with a customer taking into consideration variable prices,
discounts, chargeback, rebates, adjustments
to the net market price and in certain conditions the Company provide right to return option.
The Company includes the estimated variable
consideration in the transaction price only to the extent it is highly probable that a
significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty is resolved.
F-19
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
l.
Revenue recognition (cont.)
Following the acquisition of the four
FDA-approved plasma derived hyperimmune commercial products in November 2021, the
Company, through its wholly owned subsidiary Kamada
Inc., sells these acquired products in the U.S. market to wholesalers/distributors
that redistribute/sell these products to other parties
such as hospitals and pharmacies. Revenue recognition occurs at a point in time when
control of the product is transferred to the wholesalers/distributors,
generally on delivery of the goods.
The Company’s gross sales are subject to various deductions,
which are primarily composed of rebates and discounts to group purchasing
organizations, government agencies, wholesalers, health insurance
companies and managed healthcare organizations. These deductions
represent estimates of the related obligations, requiring the use of
judgment when estimating the effect of these sales deductions on gross
sales for a reporting period. These adjustments are deducted from
gross sales to arrive at net sales. The Company monitors the obligation
for these deductions on at least a quarterly basis and records
adjustments when rebate trends, rebate programs and contract terms,
legislative changes, or other significant events indicate that a change
in the obligation is appropriate. The Company has elected to apply
the practical expedient such that it does not evaluate payment terms
less than one year for the existence of a significant financing
component.
The following summarizes the nature of
the most significant adjustments to revenues generated from the sales of these products in the
U.S. market:
●
Wholesaler chargebacks:
Certain indirect customers of the
Company are entitled to acquire products from wholesalers at reduced prices. When applicable,
a chargeback, which represents the
difference between the invoice price to the wholesaler and the indirect customer’s discounted
price, is issued by the
wholesaler to the Company. Provisions for estimating chargebacks are calculated based on historical
experience, product demand and
the balance of the product at the wholesaler. The provision for chargebacks is recorded as a
deduction of revenue and of the
trade receivables on the consolidated statements of financial position.
●
Fees for service:
Consists of wholesaler/distributor
fees. The wholesalers/distributors charge the Company fees for the redistribution of the
products to hospitals and pharmacies. These
fees are outlined in each wholesaler/distributor contract. The fees are invoiced to
the Company monthly or quarterly by the wholesaler/distributor.
The provisions for fees for service are recorded in the same
period that the corresponding revenues are recognized.
●
Right to return option:
The company offers a right to return option under certain conditions,
mainly when goods are sold with a short expiry date. The
revenue recognized reflects the amount of consideration the company expects to
be entitled to, excluding the estimated returns.
Costs to fulfill a contract:
Costs to fulfill a contract, which primarily
consist of costs arising from technology transfers in preparation of supply contracts or
anticipated contracts, are recognized as an
asset when the costs generate or enhance the Company’s resources that will be used in
satisfying or continuing to satisfy the performance
obligations in the future and are expected to be recovered. Costs to fulfill a contract
consist of direct identifiable costs and indirect
costs that can be attributed to a contract based on a reasonable allocation method. These
costs include mainly salaries and other employee
benefits costs. Costs to fulfill a contract are amortized on a systematic basis that is
consistent with the provision of the goods and
services under the contracts.
F-20
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
l.
Revenue recognition (cont.)
As of December 31, 2024, and 2023, the
Company recognized an asset related to the costs to fulfill a contract in the net amounts of
$8,019 thousand and $8,495 thousand, respectively.
Refer to Note 10 for further information.
m.
Research and development costs
Research and development expenditures
are recognized in profit or loss when incurred and include preclinical and clinical costs (as well
as cost of materials associated with
the development of new products or existing products for new therapeutic indications). In addition,
these costs include additional product
development activities with respect to approved and distributed products as well as post marketing
commitment research and development
activities.
Since the Company’s development
projects are often subject to regulatory approval procedures and other uncertainties, the conditions for
the capitalization of costs
incurred before receipt of approvals are not normally satisfied and therefore, development expenditures are
recognized in profit or loss
when incurred.
n.
Taxes on income
Current and Deferred taxes
Taxes on income in profit or loss comprise
of current taxes, deferred taxes and taxes in respect of prior years, which are mainly
recognized in profit or loss.
Deferred taxes are computed in respect
of temporary differences between the carrying amounts in the financial statements and the
amounts attributed for tax purposes.
Deferred tax assets are reviewed at the end of each reporting period
and reduced to the extent that it is no longer probable that they will
be utilized. Deductible carryforward losses and temporary differences
for which deferred tax assets have not been recognized are
reviewed at the end of each reporting period and a respective deferred tax
asset is recognized to the extent that their utilization is
probable.
The Company operates in multiple tax
jurisdictions. Deferred taxes are offset in the statement of financial position if there is a legally
enforceable right to offset a current
tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same
taxation authority.
As of December 31, 2024, the Company recorded
a deferred tax asset, net at an amount of $488 thousands representing the utilization of
previously unrecognized tax losses and other
deductible temporary differences as the Company considered it probable that future taxable
profits will be available against which they
can be utilized. As a result, the Company recognized deferred tax income of $488 thousands
of which $16 thousands was recognized in equity.
F-21
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 2: - Material
Accounting Policies (Cont.)
n.
Taxes on income (cont.)
Uncertain tax positions
The Company evaluates potential uncertain
tax positions, including additional tax and interest expenses, and recognizes a provision when
it is more probable than not that the Company
will have to use its economic resources to pay such obligation.
As of December 31, 2024, and December 31, 2023, the application of IFRIC
23 did not have a material effect on the financial statements.
o.
Provisions
A provision in accordance with IAS 37 is recognized when the Company
has a present (legal or constructive) obligation as a result of a
past event, it is expected to require the use of economic resources
to settle the obligation and a reliable estimate can be made of the
obligation.
p.
Share-based payment transactions
The Company’s employees and members of its Board of Directors
are entitled to remuneration in the form of equity-settled share-based
payment transactions, primarily in the form of options and, in
the past, restricted shares units. The cost of such equity-settled transactions
is measured at the fair value of the equity instruments
granted at grant date. The fair value of options is determined using a standard
option pricing model, specifically the binomial option
valuation model. The fair value of restricted share units is determined using the
share price at the grant date.
The cost of equity-settled share-based payment transactions is recognized
in profit or loss together with a corresponding increase in
shareholder’s equity during the period during which the performance
and/or service conditions are to be satisfied ending on the date on
which the relevant employees or directors become entitled to the award
(“the vesting period”). The cumulative expense recognized for
equity-settled transactions at the end of each reporting period
until the vesting date reflects the extent to which the vesting period has
expired and the Company’s best estimate of the number
of equity instruments that will ultimately vest.
No expense is recognized for awards that
do not ultimately vest.
F-22
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note
3: - Significant Accounting Judgments, Estimates And Assumptions Used In The Preparation Of The Financial Statements
a.
Judgments
In the process of applying the significant
accounting policies, the Company has made the following judgments which have the most
significant effect on the amounts recognized in
the financial statements:
-
Determining the fair value of share-based payment transactions
The fair value of equity settled share-based
payment transactions is determined upon initial recognition by an acceptable option
pricing model. The inputs to the model include share
price, exercise price (if applicable) and assumptions regarding expected
volatility, expected life of the equity instrument and expected
dividend yield.
-
Revenue
Identification of performance obligations
in contracts with customers:
In order to identify distinct performance obligations in a contract
with a customer, the Company uses judgment when it
examines whether it is providing a significant service of integrating the goods or
services under the contract into one integrated
outcome.
Measurement of variable consideration
In order to determine the transaction price, the Company estimates
the amount of the variable consideration which includes
variable prices, discounts, chargeback, rebates, adjustments to the net market
price and in certain conditions the right to return
option The Company recognizes revenue in an amount where there is a high probability
that its inclusion will not result in a
significant revenue reversal in the future after the uncertainty has been resolved. Following
the acquisition of a portfolio of four
FDA-approved plasma derived hyperimmune commercial products (as described under Note 1), the Company
sells its products
mainly in the U.S market through its subsidiary Kamada Inc. to wholesalers/distributors. The Company’s gross
sales are subject
to various deductions, which are primarily composed of rebates and discounts to group purchasing organizations, government
agencies, wholesalers, health insurance companies and managed healthcare organizations. These deductions represent estimates
of the related
obligations, requiring the use of judgment when estimating the effect of these sales deductions on gross sales for a
reporting period.
Costs to fulfill a contract:
Costs to fulfill a contract, which primarily consist of costs arising
from technology transfers in preparation of supply contracts or
anticipated contracts, are recognized as an asset when the costs generate
or enhance the Company’s resources that will be used in
satisfying or continuing to satisfy the performance obligations in the future
and are expected to be recovered. Costs to fulfill a
contract consist of direct identifiable costs and indirect costs that can be attributed
to a contract based on a reasonable allocation
method. These costs include mainly salaries and other employee benefits costs. Costs to
fulfill a contract are amortized on a
systematic basis that is consistent with the provision of the goods and services under the contracts.
F-23
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note
3: - Significant Accounting Judgments, Estimates And Assumptions Used In The Preparation Of The Financial Statements (Cont.)
a.
Judgments (cont.)
-
Inventory
Work in process and finished goods
includes direct and indirect costs. The allocation of indirect costs is accounted for on a
quarterly basis by dividing the total quarterly
indirect manufacturing cost to the batches manufactured during that quarter based
on predetermined allocation factors. The criteria for
allocation of indirect manufacturing expense to manufactured batches which
eventually effect the Company’s inventory value is subject
to Company judgment.
-
Impairment of inventories with realizable value lower than cost or which are slow moving
Inventories are measured at the lower
of cost and net realizable value. The cost of inventories comprises costs of purchase of
raw and other materials and costs incurred in
bringing the inventories to their present location and condition. Net realizable
value is the estimated selling price in the ordinary
course of business, net of selling expenses. The estimation of realizable value
can affect the inventory value at the period end.
In addition, and as part of the quarterly
inventory valuation process, the Company assesses the potential effect on inventory in
cases of deviations from quality standards in
the manufacturing process to identify potential required inventory write offs. Such
assessment is subject to Company’s judgment.
-
Inventory designated for R&D activities
The Company recognizes inventory produced
for commercial sale, including costs incurred prior to regulatory approval and
prior to the filing of a regulatory request when the Company
has determined that the inventory has probable future economic
benefit. Inventory is not recognized prior to completion of a phase 3 clinical
trial unless it is probable the Company expected to
future economic benefit. For products with an approved indication, raw materials and
purchased drug product associated with
development programs are included in inventory and charged to research and development expense
when it is designated. For
products without an approved indication, drug product is charged to research and development expenses. The
estimation of
future economic and the recognition of an inventory for unapproved indication is subject to Company’s judgment.
-
Lease extension and/or termination options
In evaluating whether it is reasonably certain that the Company will
exercise an option to extend a lease or not exercise an
option to terminate a lease, the Company considers all relevant facts and circumstances
that create an economic incentive for the
Company to exercise the option to extend the lease such as: the amounts invested in leasehold
improvements, the significance of
the underlying asset to the Company’s operation and whether it is a specialized asset, the Company’s
past experience with
similar leases, etc.
After the commencement date, the Company
reassesses the term of the lease upon the occurrence of a significant event or a
significant change in circumstances that affects whether
the Company is reasonably certain to exercise an option or not exercise
an option previously included in the determination of the lease
term, such as significant leasehold improvements that had not
been anticipated on the lease commencement date, sublease of the underlying
asset for a period that exceeds the end of the
previously determined lease period, etc.
F-24
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note
3: - Significant Accounting Judgments, Estimates And Assumptions Used In The Preparation Of The Financial Statements (Cont.)
a.
Judgments (cont.)
-
Recognition of deferred tax asset in respect of carry forward tax losses
Deferred tax assets are recognized
for unused carryforward tax losses and deductible temporary differences to the extent that it is
probable that taxable profit will be
available against which the losses can be utilized. Significant management judgment is
required to determine the amount of deferred tax
assets that can be recognized, based upon the timing and level of future taxable
profits, its source and the tax planning strategy. For
information regarding deferred taxes recognition, please refer to Note 21.
-
Uncertain income tax treatments:
When there is uncertainty as to whether
the tax authorities will accept the tax treatment taken by the Company, the Company
assesses the level of such uncertainty and the risk
of additional taxes as a result. Significant management judgment is required to
such exposure given the Company’s past experience
and applicable tax law interpretations. The possible effects on the financial
statements are a change in taxes on income.
-
Determining cash-generating units
Impairment testing for assets that cannot
be tested individually are grouped together into the smallest group of assets that
generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets
(the “CGU”).
Goodwill impairment testing is performed at the lowest level at which
goodwill is monitored for internal reporting purposes.
Significant management judgment is required to determine which is the CGU (or group
of CGUs) are applicable to monitor the
goodwill. When goodwill is not monitored for internal reporting purposes, it is allocated to operating
segments and not to a
CGU (or group of CGUs). Goodwill acquired in a business combination is allocated to groups of CGUS, including CGUs
existing prior to the business combination, that are expected to benefit from the synergies of the combination. Also refer to Note
10.
-
Impairment of Company’s non-financial assets
The carrying amounts of the Company’s
non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. Significant management
judgment is required to determine such impairment, and if any such
indication exists, then the asset’s recoverable amount is estimated.
b.
Estimates and assumptions
The preparation of the financial statements
requires management to make estimates and assumptions that have an effect on the
application of the accounting policies and on the reported
amounts of assets, liabilities, revenues and expenses. Changes in accounting
estimates are reported in the period of the change in estimate.
The key assumptions made in the financial
statements concerning uncertainties at the end of the reporting period and the critical estimates
computed by the Company that may result
in a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
-
Pensions and other post-employment benefits
The liability in respect of post-employment
defined benefit plans is determined using actuarial valuations. The actuarial
valuation involves making assumptions about, among other
things, discount rates, expected rates of return on assets, future
salary increases and mortality rates. Due to the long-term nature
of these plans, such estimates are subject to significant
uncertainty.
F-25
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note
3: - Significant Accounting Judgments, Estimates And Assumptions Used In The Preparation Of The Financial Statements (Cont.)
b.
Estimates and assumptions (cont.)
-
Legal claims
In estimating the likelihood of outcome
of legal claims filed against the Company, the Company relies on the opinion of its legal
counsel. These estimates are based on the legal
counsel’s best professional judgment, considering the stage of proceedings and
historical legal precedents in respect of the different
issues. Since the outcome of the claims will be determined in courts, the
results could differ from these estimates.
-
Discount rate for a lease liability
When the Company is unable to readily
determine the discount rate implicit in a lease to measure the lease liability, the
Company uses an incremental borrowing rate. That rate
represents the rate of interest that the Company would have to pay to
borrow over a similar term and with similar security, the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment. When there are no financing
transactions that can serve as a basis, the Company
determines the incremental borrowing rate based on its credit risk, the lease term
and other economic variables deriving from the
lease contract’s conditions and restrictions. In certain situations, the Company
is assisted by an external valuation expert in
determining the incremental borrowing rate.
-
Impairment of goodwill
The Company reviews goodwill for impairment
at least once a year. This requires management to make an estimate of the
projected future cash flows from the continuing use of the
CGU (or a group of CGUs) to which the goodwill is allocated and to
choose a suitable discount rate for those cash flows.
-
Determination of Useful Life
Intangible assets and property, plant
and equipment are measured on initial recognition at cost including directly attributable
costs. Intangible assets acquired in a business
combination are measured at fair value at the acquisition date. In determining the
useful life and the depreciation or amortization method,
the Company assesses the period over which an asset is expected to be
available for use by the Company and the pattern in which the asset’s
future economic benefits are expected to be consumed by
the Company.
-
Determining the fair value of an unquoted financial asset or liability
The fair value of unquoted financial
assets or liability in Level 3 of the fair value hierarchy is determined using valuation
techniques, generally using future cash flows
discounted at current rates applicable for items with similar terms and risk
characteristics. Changes in estimated future cash flows
and estimated discount rates, after consideration of risks such as liquidity
risk, credit risk and volatility, are liable to affect the
fair value of these assets of liability.
Contingent consideration is measured
at fair value. The fair value is determined using valuation techniques and method, using
future cash flows discounted. This requires
management to make an estimate of the projected future cash flows. For information
regarding contingent consideration, please refer to
Note 13 and Note 15.
F-26
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 4: New Accounting
Standards or Amendments for 2023 and Forthcoming Requirements
a.
New Currently Effective Requirements
-
Amendment to IAS 1, Presentation of Financial Statements: Classification
of Liabilities as Current or Non-Current and
subsequent amendment: Non-Current Liabilities with Covenants
The amendment, together with the subsequent
amendment to IAS 1 (see hereunder) replaces certain requirements for classifying
liabilities as current or non-current. According to
the amendment, a liability is classified as non-current when the entity has the
right to defer settlement for at least 12 months after
the reporting period, and it “has substance” and is in existence at the end of
the reporting period. According to the subsequent
amendment, as published in October 2022, covenants with which the entity
must comply after the reporting date do not affect classification
of the liability as current or non-current. Additionally, the
subsequent amendment adds disclosure requirements for liabilities subject
to covenants within 12 months after the reporting
date, such as disclosure regarding the nature of the covenants, the date they need
to be complied with and facts and
circumstances that indicate the entity may have difficulty complying with the covenants. Furthermore,
the amendment clarifies
that the conversion option of a liability will affect its classification as current or non-current, other than
when the conversion
option is recognized as equity.
The amendment and subsequent amendment
are effective for reporting periods beginning on or after January 1, 2024, with
earlier application being permitted. The amendment and
subsequent amendment are applicable retrospectively, including an
amendment to comparative data.
The Amendment did
not have a material impact on its financial statement.
b.
Forthcoming requirements
-
Presentation and Disclosure in Financial Statements
- IFRS 18
In April 2024, the IASB issued IFRS
18 Presentation and Disclosure in Financial Statements (“IFRS 18”) which replaces IAS 1
Presentation of Financial Statements.
IFRS 18 requires an entity to classify all income and expenses within its statement of
profit or loss into one of five categories: operating;
investing; financing; income taxes; and discontinued operations. The first
three categories are new. These categories are complemented
by the requirement to present subtotals and totals for “operating
profit or loss,” “profit or loss before financing
income and taxes,” and “profit or loss.” IFRS 18, and the amendments to the
other standards, is effective for reporting
periods beginning on or after January 1, 2027, but earlier application is permitted.
The Company is currently assessing
the impact of the Standard on its financial statements.
F-27
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 5: - Cash and
Cash Equivalents
December 31,
2024
2023
U.S. Dollars in thousands
Cash and deposits for immediate withdrawal
$
23,130 $
40,630
Cash equivalents in USD deposits (1)
55,305
15,011
Total Cash and Cash Equivalents
$
78,435 $
55,641
(1) The deposits bear interest of 4.70%-5.78% per year, as of December 31, 2024, and 5.1% per year as of December 31, 2023.
Note 6: - Trade
Receivables, Net
December 31,
2024
2023
U.S. Dollars in thousands
Trade receivables
$
21,388 $
19,726
Less allowance for expected credit losses
-
-
$
21,388 $
19,726
Checks receivable
159
151
Total Trade receivables, net
$
21,547 $
19,877
An analysis of the trade receivables with
reference to reporting date:
Past due trade receivables with
aging of
Neither
past
due nor
impaired
Up to
30 Days
31-60 Days 61-90 Days
91-120
Days
Over
121 days
Total
December 31, 2024
$
20,094 $
113 $
10 $
32 $
6 $
1,292 $
21,547
December 31, 2023
$
18,294 $
1,391 $
11 $
10 $
26 $
145 $
19,877
(1) Following
December 31, 2024, $9,889 thousand was collected on account of the outstanding trade receivable as of December 31, 2024. The amount
collected
includes $1,187 thousand on account of the amount past due over 120 days as of December 31, 2024, included in the table above.
F-28
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 7: - Other Accounts
Receivables
December 31,
2024
2023
U.S. Dollars in thousands
Prepaid expenses
$
3,847 $
4,405
Government authorities
894
981
Derivatives financial instruments mainly measured at fair value through other comprehensive income
49
149
Accrued other income
235
45
Other (1)
521
385
Total Other Accounts Receivables
$
5,546 $
5,965
(1) The balance, as of December 31, 2024, and December 31, 2023, includes $247 thousand, as bank guarantee provided (refer to Note 18 for further
details) and short-term lease in the amount of $267 thousand and $134 thousand, respectively that was classified to other accounts receivables (refer to
Note 14 for further details)
Note 8: - Inventories
December 31,
2024
2023
U.S. Dollars in thousands
Finished products
$
29,368 $
42,526
Purchased products
9,749
11,021
Work in progress
9,165
6,653
Raw materials
30,537
28,279
Total Inventories
$
78,819 $
88,479
(1) During the years 2024, 2023 and 2022, the Company recognized, as cost of revenues, an impairment for inventories carried at net realizable value
totaled of $8,628 thousand, $4,399 thousand, and $3,996 thousand, respectively.
F-29
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 9: - Property, Plant
And Equipment
Composition and changes:
2024
Land and
Buildings(1), (3)
Machinery
and
Equipment(1)
Vehicles
Computers,
Software,
Equipment
and Office
Furniture
Leasehold
Improvements(2)
Total
U.S. Dollars in thousands
Cost
Balance at January 1, 2024
$
36,041 $
37,997 $
31 $
11,472 $
3,093 $
88,634
Additions
1,306
3,546
-
1,891
5,951
12,694
Sale and write-off
(23)
(86)
-
(110)
-
(219)
Balance as of December 31, 2024
37,324
41,457
31
13,253
9,044
101,109
Accumulated Depreciation
Balance as of January 1, 2024
23,294
27,259
29
9,050
778
60,410
Depreciation
1,149
1,975
2
1,230
305
4,661
Sale and write-off
(22)
(75)
-
(110)
-
(207)
Balance as of December 31, 2024
24,421
29,159
31
10,170
1,083
64,864
Depreciated cost as of December 31,
2024
$
12,903 $
12,298 $
- $
3,083 $
7,961 $
36,245
(1) Including labor costs charged in 2024 to the cost of facilities, machinery, and equipment in the amount of $1,853 thousand.
(2) Including Right – of use assets depreciation expense in the amount of $128 thousand that was capitalized to the Leasehold Improvements during 2024.
Also refer to Note 14.
(3) Kamada Assets Ltd. (“Kamada Assets”), a subsidiary of the Company, capitalized leasing rights from the Israel Lands Administration for an area of
16,880 m² in Beit Kama, Israel, on which the Company’s manufacturing plant and other buildings are located. As part of a new outline which were
approved during 2021, the plant area was adjusted to 14,880 m². The amount attributed to capitalized rights is presented under property, plant and
equipment and is depreciated over the leasing period, which includes the lease extension option period. During 2010, Kamada Assets signed an
agreement with the Israel Lands Administration to consolidate its leasing rights and extend the lease period to 2058; the lease also includes an
extension option allowing the parties to extend the lease for an additional 49 years following the conclusion of the initial term.
F-30
Kamada
Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 9: - Property, Plant
And Equipment (Cont.)
Composition and changes: (cont.)
2023
Land and
Buildings(1)
Machinery
and
Equipment(1)
Vehicles
Computers,
Software,
Equipment
and Office
Furniture
Leasehold
Improvements(2)
Total
U.S. Dollars in thousands
Cost
Balance at January 1, 2023
$
35,090 $
35,343 $
31 $
10,337 $
1,566 $
82,367
Additions
951
2,764
-
1,135
1,544
6,394
Sale and write-off
-
(110)
-
-
(17)
(127)
Balance as of December 31, 2023
36,041
37,997
31
11,472
3,093
88,634
Accumulated Depreciation
Balance as of January 1, 2023
22,154
25,493
26
7,882
655
56,210
Depreciation
1,140
1,875
3
1,168
123
4,309
Sale and write-off
-
(109)
-
-
-
(109)
Balance as of December 31, 2023
23,294
27,259
29
9,050
778
60,410
Depreciated cost as of December 31, 2023 $
12,747 $
10,738 $
2 $
2,422 $
2,315 $
28,224
(1) Including labor costs charged in 2023 to the cost of facilities, machinery, and equipment in the amount of $1,426 thousand.
(2) Including Right – of use assets depreciation expense in the amount of $20 thousand that was capitalized to the Leasehold Improvements during 2023.
Also refer to Note 14.
(3) Kamada Assets Ltd. (“Kamada Assets”), a subsidiary of the Company, capitalized leasing rights from the Israel Lands Administration for an area of
16,880 m² in Beit Kama, Israel, on which the Company’s manufacturing plant and other buildings are located. As part of a new outline which were
approved during 2021, the plant area was adjusted to 14,880 m². The amount attributed to capitalized rights is presented under property, plant and
equipment and is depreciated over the leasing period, which includes the lease extension option period. During 2010, Kamada Assets signed an
agreement with the Israel Lands Administration to consolidate its leasing rights and extend the lease period to 2058; the lease also includes an
extension option allowing the parties to extend the lease for an additional 49 years following the conclusion of the initial term.
F-31
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 10: - Intangible Assets,
Goodwill and Other Long-Term Assets
a.
Composition and changes:
December 31,
2024
2023
U.S. Dollars in thousands
Intangible Assets
101,860
109,642
Long term pre-paid expenses(1)
1,366
510
Intangible assets and other long-term assets
103,226
110,152
Goodwill
30,313
30,313
Contract asset
8,019
8,495
$
141,558 $
148,960
(1) Includes mainly prepayment for excess tax
Intangible Assets:
2024
Intellectual
property(1)
Customer
Relationships
(1)
Other
Intangibles(2)
(3)
Total
Intangible
Assets
Goodwill(1)
Contract
asset(4)
U.S. Dollars in thousand
Cost:
Balance as of January 1, 2024
80,103 $
33,514 $
11,230 $
124,847 $
30,313 $
8,546
Purchases
-
-
-
Balance as of December 31, 2024
$
80,103 $
33,514 $
11,230 $
124,847 $
30,313 $
8,546
Accumulated amortization and impairment:
Balance as of January 1, 2024
8,518
3,531
3,156
15,205
-
51
Amortization recognized in the year
4,021
1,676
1,495
7,192
-
476
Impairment loss (3)
-
-
590
590
-
-
Balance as of December 31, 2024
12,539
5,207
5,241
22,987
-
527
Amortized cost at December 31, 2024
$
67,564 $
28,307 $
5,989 $
101,860 $
30,313 $
8,019
2023
Intellectual
property(1)
Customer
Relationships
(1)
Other
Intangibles(2)
Total
Intangible
Assets
Goodwill(1)
Contract
asset(4)
U.S. Dollars in thousand
Cost:
Balance as of January 1, 2023
80,103 $
33,514 $
11,101 $
124,718 $
30,313 $
7,577
Purchases
-
-
129
129
969
Balance as of December 31, 2023
$
80,103 $
33,514 $
11,230 $
124,847 $
30,313 $
8,546
Accumulated amortization and impairment:
Balance as of January 1, 2023
4,497
1,855
1,670
8,022
-
-
Amortization recognized in the year
4,021
1,676
1,486
7,183
-
51
Impairment loss (3)
-
-
-
-
-
-
Balance as of December 31, 2023
8,518
3,531
3,156
15,205
-
51
Amortized cost at December 31, 2023
$
71,585 $
29,983 $
8,074 $
109,642 $
30,313 $
8,495
(1) The Intellectual Property, Customer Relationship and Goodwill generated by the November 2021 Saol APA, in the amount of 79,141 thousands,
33,519 thousands and 29,896 thousands respectively other than intellectual property and goodwill in the amount of $962 thousands and $416,
respectively which were generated by the acquisition of the Company’s plasma collection center in Beaumont, Texas consumed during March, 2021
F-32
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 10: - Intangible Assets,
Goodwill and Other Long-Term Assets (Cont.)
a.
Composition and changes: (cont.)
(2) Includes assumed contract manufacturing agreement associated with the November 2021 Saol APA and distribution right of certain pharmaceutical
products to be distributed in Israel, subject to IL MOH and or EMA marketing authorization. The Company was required to make certain upfront and
milestone payments on account of such distribution rights. These payments are accounted for as long-term assets through obtaining IL MOH marketing
authorization and will subsequently be amortized during the expected distribution right’s useful life.
(3) During 2024 the Company recognized impairment loss of $590 arising from certain distribution rights assets, from which the Company does not
expect future economic benefits.
(4) In December 2019, the Company entered into a binding term sheet for a 12-year contract manufacturing agreement with Saol to manufacture
CYOTGAM. As a result of the execution and consummation of the Saol APA as detailed in Note 1, which included the acquisition of all rights relating
to CYTOGAM, the previous engagement with Saol with respect to this product expired. Following the successful execution of the technology transfer
from the previous manufacturer and pending all necessary FDA approvals, the Company obtained during May 2023 FDA approval to manufacture
CYTOGAM at its facility in Beit Kama, Israel.
The Company amortizes the contract asset over an 18-year period on a straight-line basis, representing the expected duration of the relationship with its
relevant customers. The amortized cost was included in the cost of goods sold. No impairment losses were recognized.
b.
Amortization:
Amortization expenses of intangible assets
and contract assets are classified in statement of profit or loss as follows:
Year ended December 31,
2024
2023
2022
USD in thousands
Cost of goods sold
5,915
5,491
5,376
Other expenses and income
590
-
-
Selling and marketing expenses
1,753
1,743
1,807
8,258
7,234
7,183
c.
Allocation of goodwill to cash-generating units
December 31,
2024
2022
U.S. Dollars in thousands
Proprietary
$
30,313 $
30,313
The goodwill is attributed to the Proprietary
Products segment, which represent the lowest level within the Company at which goodwill is
monitored for internal management purposes.
Impairment test of goodwill for the
year ended on December 31, 2024:
Impairment loss for goodwill is recognized
if the recoverable amount of the goodwill is less than the carrying amount. The recoverable
amount is the greater of fair value less
costs of disposal, or value in use of the relevant reporting level (i.e., a CGU of a group of CGUs).
The Company performed an assessment
for goodwill impairment for its Proprietary Products segment, which is the level at which
goodwill is monitored for internal management
purposes and concluded that the fair value of the Proprietary Products segment exceeds
the carrying amount by approximately 24%. The
carrying amount of goodwill assigned to this segment is in the amount of $30,313
thousand.
When evaluating the fair value of the
Proprietary Products segment, the Company used a discounted cash flow model which utilized
Level 3 measures that represent unobservable
inputs. Key assumptions used to determine the estimated fair value include: (a) internal
cash flows forecasts for 5 years following the
assessment date, including expected revenue growth, costs to produce, operating profit
margins and estimated capital needs; (b) an estimated
terminal value using a terminal year long-term future growth rate of -5.0%
determined based on the long-term expected prospects of the
reporting unit; and (c) a discount rate (post-tax) of 12.2 % which reflects the
weighted-average cost of capital adjusted for the relevant
risk associated with the Proprietary Products segment’s operations.
Actual results may differ from those
assumed in the Company’s valuation method. It is reasonably possible that the Company’s
assumptions described above could
change in future periods. If any of these were to vary materially from the Company’s plans, it may
record impairment of goodwill
allocated to this reporting unit in the future. A hypothetical decrease in the growth rate of 1% or an
increase of 1% to the discount
rate would have reduced the fair value of the Proprietary Products segment by approximately $5,142
thousand and $21,164 thousand, respectively.
F-33
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 10: - Intangible Assets,
Goodwill and Other Long Term Assets (Cont.)
c.
Allocation of goodwill to cash-generating units (cont.)
The sensitivity analysis described
above does not lead to increase of the recoverable amount over the carrying amount.
Based on the Company’s assessment as of December 31, 2024, no
impairment loss for goodwill was required to be recorded.
Note 11: - Trade Payables
December 31,
2024
2023
U.S. Dollars in thousands
Open debts mainly in USD
$
16,006 $
11,167
Open debts in EUR
2,314
7,266
Open debts in NIS
9,415
6,371
Total Trade Payables
$
27,735 $
24,804
Note 12: - Other Accounts
Payables
a.
Composition:
December 31,
2024
2023
U.S. Dollars in thousands
Employees and payroll accruals
$
9,218 $
7,542
Government grants (b)
-
177
Accrued Expenses and Others
453
542
Total Other Accounts Payables
$
9,671 $
8,261
b.
Government grants:
Presented in the statement of financial position and Profit or Loss
and Other Comprehensive Income:
December 31,
2024
2023
U.S. Dollars in thousands
Current Assets
$
11 $
104
Current liability
$
- $
177
Royalties paid during the year
$
(177) $
-
Expense (income) carried to Research and Development cost
$
17 $
61
F-34
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 13: - Loans and Financial
liabilities
a.
Financial liabilities originated or assumed through business combinations
December 31,
2024
2023
U.S. Dollars in thousands
Contingent consideration (1)
23,566
21,855
Assumed liabilities (2)
40,079
46,375
Less current maturities
(10,181)
(14,996)
Total Long term contingent consideration and assumed liabilities
$
53,462
53,234
(1) Contingent consideration is measured at fair value. The change in the balance of the contingent consideration reflect the payments made on account of
such and the change in the fair value of the liability. Refer also to note 15.
Pursuant to the Saol APA, the Company agreed to pay up to $50,000 thousand
of contingent consideration subject the achievement of sales thresholds
for the period commencing on the acquisition date and ending on
December 31, 2034. Through December 31, 2024, the first two sales thresholds were
met, and the Company paid two $3,000 thousands on account
of these thresholds These payments were accounted for as a reduction of the liability.
The Company may be entitled for up to $3,000 thousand
credit deductible from the contingent consideration payments due for the years 2023 through
2027, subject to certain conditions as defined
in the Saol APA. During 2023 and 2024, the entitlement of the credit was not met.
The fair value of the contingent consideration was $23,566 thousand
and $21,855 thousand as of December 31, 2024, and December 31, 2023,
respectively. The Company accounted for $4,711 thousand, $1,321 thousand,
and $1,539 thousand, for the years ended December 31, 2024, 2023 and
2022, respectively as financing expenses in the statement of profit
and loss to reflects the changes in the fair value of the liability.
(2) Assumed liabilities are measured at amortized cost. The changes in
the balance of the assumed liabilities reflects the payments made on account of
such and the changes in time value and changes in expected
payments.
Pursuant to the Saol APA, the Company acquired inventory valued at $14,199 thousand which was paid in ten quarterly installments of $1,500
thousand each or the remaining balance at the final installment (the “Deferred Liability”). Through December 31, 2023, the Company made eight
quarterly installments on account of such inventory related debt and through December 31, 2024, the Company made all payments due on account of
such liability. As part of the Saol APA, the Company also assumed certain of Saol’s liabilities for the future payment of royalties (some of which are
perpetual) and milestone payments to third party subject to the achievement of corresponding CYTOGAM related net sales (the “Assumed
Liabilities”).
F-35
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 13: - Loans and Financial
liabilities (Cont.)
a.
Financial liabilities originated or assumed through business combinations (cont.)
Such assumed liabilities include:
●
Royalties:10% of the annual global net sales of CYTOGAM up to $ 25,000 thousand and 5% of net sales that are greater than $ 25,000 thousand,
in perpetuity; 2% of the annual global net sales of CYTOGAM in perpetuity; and 8% of the annual global net sales of CYTOGAM for a period of
six years following the completion of the technology transfer of the manufacturing of CYTOGAM to the Company (such royalty payments
commenced on October 1, 2023 following the completion of such technology transfer), subject to a maximum aggregate of $5,000 thousand per
year and the total amount of $30,000 thousand throughout the entire six years period.
During the years ended December 31, 2024, 2023 and 2022, the Company recognized net revenues of $22,521 thousands, $17,180 thousands and
$22,600 thousands, respectively from sales of CYTOGAM.
●
Sales milestones: two $1,500 thousand sales milestones subject to achievement
of certain sales thresholds with respect to CYTOGAM sales in the
United States market, of which the first sales threshold was achieved
and the milestone payment was made during 2023, and the second threshold
was not achieved and was written off the outstanding liability.
●
Milestone: $8,500 thousand upon the receipt of FDA approval for the manufacturing of CYTOGAM at the Company’s manufacturing facility.
During May 2023, the Company received such FDA approval and paid the milestone of $8,500 thousand.
The value of the Assumed Liabilities and Deferred Liability was $40,079
thousand and $46,375 thousand as of December 31, 2024, and 2023,
respectively. During the years ended December 31, 2024, and 2023, the
Company paid a total of $9,667 thousand and $14,300 thousand on
account of such Assumed Liabilities and Deferred Liability. The Company
accounted for $3,370 thousand as financing expenses and $341
thousand of financing income, and $4,727 thousand of financing expenses for
the years ended December 31, 2024, 2023 and 2022, respectively to
reflects the changes in the value of the assumed liabilities.
b.
Bank loan:
On November 15, 2021, the Company secured
a $40,000 thousand credit facility from Bank Hapoalim, an Israeli bank. The credit facility
comprised of the following:
(1) A $20,000 thousand long-term loan. The loan bore an interest at a rate of SOFR (Secured Overnight Financing Rate) +2.18%
and was payable over 54 equal monthly installments commencing June 16, 2022.
On September 19, 2023, the Company repaid in full the outstanding balance of the loan.
(2) A $20,000 thousand short-term revolving credit
facility. The credit facility bore an interest at a rate of SOFR +1.75%, or a
commitment fee of 0.2% calculated over the unutilized balance
of the facility.
The credit facility was in effect for an initial
period of 12 months, and effective as of January 1, 2023, the credit facility was
amended such that the $20 million short-term revolving
credit facility was reduced to a NIS 35 million (approx. $10 million)
credit facility and the credit facility was extended for an additional
period of 12 months. Subsequently on January 1, 2024, it was
extended for an additional period of 12 months.
Borrowings under the amended credit facility accrue
interest at a rate of PRIME + 0.55 and are repayable no later than 12
months from the date advanced. The Company is required to pay an
annual fee of 0.275% for the Bank’s credit allocation.
Since its establishment and through December 31, 2024, the Company
did not utilize such credit facility.
Pursuant to the loan and credit facility
agreement, the Company was required to meet certain financial covenants for the years ending
December 31, 2022, and through the term of
the loan and credit facility. As of December 31, 2024, and 2023, the Company was in
compliance with the financial covenants.
On February 17, 2025, the Company converted
the credit facility to a NIS 35,000 thousand On-Call credit facility from Bank Hapoalim,
with each loan thereunder bearing interest at
a rate of 6.3%. As part thereof, The Company undertook not to create a floating charge over
all or materially all of its assets. In addition,
the previous credit facility, as described above, has been terminated, together with all
obligations to meet financial covenants.
See Note 14 regarding pledge information
related to the bank loans.
F-36
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial
Statements
Note 14: - Leases
The Company entered into lease agreements with respect to the following
items:
1.
Office and storage spaces:
In November 2016, the Company entered into a lease agreement for office space and a laboratory facility in Rehovot, Israel for an initial
period of ten years (which includes a three-year extension through November 2026). In March 2023, the lease agreement was amended,
and the lease period was extended for an additional eight years through January 2032.
On March 7, 2023, the Company’s U.S. subsidiary Kamada Plasma LLC entered into a lease agreement for a 12,000 square feet premises
in Houston, Texas to be used as a plasma collection center. The lease is in effect for an initial period of ten years commencing February
2024 and includes an option to extend the lease for two consecutive periods of five years upon at least 120 days prior written notice.
On May 2, 2024, the Company’s U.S. subsidiary Kamada Plasma LLC entered into a lease agreement for a 11,100 square feet premises in
San Antonio, Texas to be used as a plasma collection center. The lease is in effect for an initial period of ten years commencing on the
rent commencement date which will be the earlier of (a) opening for business in the facility or (b) 180 days following receipt of building
permits. The lease agreement may be extended for three consecutive periods of five years each, upon at least 120 days prior written
notice.
2.
Vehicles:
The Company leases
vehicles for the use of certain of its employees in Israel. The lease term is mainly for three-year periods.
3.
Office equipment (i.e. printing and photocopying machines):
The Company leases office equipment (i.e.,
printing and photocopying machines), each for a five-year period.
Right-of-use assets composition
and changes in lease liabilities
Right-of-use-assets
Rented
Offices(1)
Vehicles
Computers,
Software,
Equipment
and
Office
Furniture
Total
Lease
Liabilities (2)(3)
U.S Dollars in thousands
As of January 1, 2024
$
6,363 $
1,397 $
1 $
7,761 $
8,822
Additions to right-of-use assets
2,547
858
28
3,432
3,432
Termination lease
(12)
(73)
-
(84)
(69)
Depreciation expense
(666)
(812)
(14)
(1,492)
-
Exchange rate differences
-
-
-
-
128
Repayment of lease liabilities
-
-
-
-
(1,251)
As of December 31, 2024
$
8,232 $
1,370 $
15 $
9,617 $
11,062
(1) Out of the Depreciation expense $127 thousand was capitalized to the Leasehold Improvements.
(2) The weighted average incremental borrowing rate used to discount future
lease payments in the calculation of the lease liability was in the range of
6.16%–7.11% evaluated based on credit risk, terms of
the leases and other economic variables.
(3) The balance does not include current maturities of lease of $267 thousand
that were classified to other accounts receivables due to expected lease
incentive.
During 2024, the Company recognized $587 thousand as financial expenses on lease liabilities.
During 2024, the total cash outflow for leases was $1,251 thousand.
F-37
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 14: - Leases (Cont.)
Right-of-use-assets
Rented
Offices(1)
Vehicles
Computers,
Software,
Equipment
and Office
Furniture
Total
Lease
Liabilities(2)
(3)
U.S Dollars in thousands
As of January 1, 2023
$
1,732 $
829 $
7 $
2,568 $
3,193
Additions to right -of -use assets
5,131
1,415
-
6,546
6,682
Lease termination
(109)
-
(109)
(107)
Depreciation expense
(500)
(738)
(6)
(1,244)
-
Exchange rate differences
-
-
-
-
(96)
Repayment of lease liabilities
-
-
-
-
(850)
As of December 31, 2023
$
6,363 $
1,397 $
1 $
7,761 $
8,822
(1) Out
of the Depreciation expense $20 thousand was capitalized to the Leasehold Improvements.
(2) The
weighted average incremental borrowing rate used to discount future lease payments in the calculation of the lease liability was in the
range of
3.06%–7.11% evaluated based on credit risk, terms of the leases and other economic variables.
(3) The balance does not include current maturities of lease of $134 thousand
that were classified to other accounts receivables due to expected lease
incentive.
During 2023, the Company recognized $367 thousand as financial expenses on lease liabilities.
During 2023, the total cash outflow for leases was $850 thousand.
As of December 31, 2024:
Less than
one year
1 to 2
2 to 3
3 to 5
6 and
thereafter
Total
Lease liabilities (including
interest)
$
3,708 $
3,014 $
1,700 $
2,458 $
10,265 $
21,145
As of December 31, 2023:
Less than
one year
1 to 2
2 to 3
3 to 5
6 and
thereafter
Total
Lease liabilities
(including interest)
$
2,918 $
3,045 $
1,689 $
2,009 $
6,759 $
16,420
Lease extension
The Company has leases that include extension options. These
options provide flexibility in managing the leased assets and align with the
Company’s business needs.
The Company exercises judgement in deciding whether it is
reasonably certain that the extension options will be exercised.
F-38
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 14: - Leases (Cont.)
The lease agreement entered into by Kamada
Plasma LLC for the premises in Houston, Texas and in San Antonio, Texas to be used as a
plasma collection center includes an option
to extend the lease as follow:
-
Houston, Texas: extend the lease
for two consecutive periods of five years each, upon 120 days prior written notice.
-
San Antonio, Texas: extend the lease for
three consecutive periods of five years each, upon at least 120 days prior written notice.
The Company has reasonable certainty that the extension
option will be exercised in order to avoid a significant adverse impact to its
operating activities.
Note 15: - Financial Instruments
a.
Classification of financial assets and liabilities
The financial assets liabilities in the balance sheet are
classified by groups of financial instruments pursuant to IFRS 9:
December 31,
2024
2023
U.S. Dollars in thousands
Financial assets
Financial assets at fair value through profit or loss:
Foreign exchange forward contracts
-
8
Total Financial assets at fair value through profit or loss
$
- $
8
Financial assets at fair value through other comprehensive income:
Cash flow hedges
59
141
Total Financial assets at fair value through other comprehensive income:
$
59 $
141
Financial assets at amortized cost:
Cash and cash equivalent
78,435
55,641
Total Financial assets at amortized cost
$
78,435 $
55,641
Total financial assets
$
78,494 $
55,790
Financial liabilities
Financial liabilities at fair value through profit or loss:
Foreign exchange forward contracts
10
-
Contingent consideration in business combination(1)
23,566
21,855
Total financial liabilities at fair value through profit or loss
$
23,576 $
21,855
Financial liabilities measured at amortized cost:
Assumed liabilities through business combination(1)
40,079
46,375
Leases
11,062
8,822
Total financial liabilities measured at amortized cost
$
54,141 $
55,197
Total financial and lease liabilities
$
74,717 $
77,052
(1) Refer to note 13(a) for additional information.
F-39
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 15: - Financial Instruments
(Cont.)
b.
Financial risk factors
The Company’s activities expose
it to various financial risks, such as market risk (foreign currency risk, interest rate risk and price risk),
credit risk and liquidity
risk. The Company’s investment policy focuses on activities that will preserve the Company’s capital. The
Company utilizes
derivatives to hedge certain exposures to risk.
Risk management is the responsibility
of the Company’s management and specifically that of the Company’s Chief Executive Officer
(CEO) and Chief Financial Officer
(CFO), in accordance with the policy approved by the Board of Directors. The Board of Directors
provides principles for the overall risk
management.
1.
Market risks
Foreign exchange risk
The Company operates in an international
environment and is exposed to foreign exchange risk resulting from the exposure to
different currencies, mainly the NIS and EUR. Foreign
exchange risks arise from recognized assets and liabilities denominated
in a foreign currency other than the functional currency, such
as trade and other accounts receivables, trade and other accounts
payables, loans and capital leases.
As of December 31, 2024, and 2023,
the Company held financial derivatives intended to hedge changes in the exchange rate of
the USD vs. the NIS and the EUR (see also Note
15f. below).
2.
Credit risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash and cash
equivalents, short-term bank deposits, trade
receivables and foreign currency derivative contracts.
a)
Cash, cash equivalent and short-term investments:
The Company holds cash, cash equivalents,
short term deposits and other financial instruments at major financial
institutions in Israel and the United States. In accordance with
Company policy, evaluations of the relative strength of
credit of the various financial institutions are made on an ongoing basis.
Short-term investments include short-term
deposits with low risk for a period less than one year.
b)
Trade receivables:
The Company regularly monitors the credit
extended to its customers and their general financial condition, and, when
necessary, requires collateral as security for the debt such
as letters of creditor and down payments. In addition, the
Company partially insures its non-Israeli based accounts receivables with foreign
trade risk insurance. Refer to Note 6
for additional information.
F-40
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 15: - Financial Instruments
(Cont.)
b.
Financial risk factors (cont.)
2.
Credit risk (cont.)
The Company keeps constant track of customer
debt, and, to the extent required, accounts for an allowance for
expected credit losses that adequately reflects, in the Company’s
assessment, the loss embodied in the debts the
collection of which is in doubt.
The Company’s maximum exposure
to credit risk for the components of the statement of financial position as of
December 31, 2024, and 2023 is the carrying amount of
trade receivables.
c)
Foreign currency derivative contracts:
The Company is exposed to foreign currency
exchange fluctuations, primarily in USD vs. NIS and EUR. Consequently,
it enters into various foreign currency exchange contracts with
major Israeli financial institutions (see also Note 15f.
below).
d)
Interest rate risk:
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company’s
exposure to the risk of changes in market interest rates relates
primarily to the Company’s long-term liabilities.
3.
Liquidity risk
The table below summarizes the maturity
profile of the Company’s financial liabilities based on contractual undiscounted
payments:
December 31, 2024
Less than
one year
1 to 2
2 to 3
3 to 5
6 and
thereafter
Total
Trade payables
$
27,735 $
- $
- $
- $
- $
27,735
Assumed liabilities(1)
6,913
4,419
4,393
7,675
16,679
40,079
Other accounts payables
9,671
-
-
-
-
9,671
Lease liabilities (including interest)
3,708
3,014
1,700
2,458
10,265 $
21,145
$
48,027 $
7,433 $
6,093 $
10,133 $
26,944 $
98,630
December 31, 2023
Less than
one year
1 to 2
2 to 3
3 to 5
6 and
thereafter
Total
Trade payables
$
24,804 $
- $
- $
- $
- $
24,804
Assumed liabilities(1)
11,996
4,152
4,261
7,836
18,130
46,375
Other accounts payables
8,261
-
-
-
-
8,261
Lease liabilities (including interest)
2,918
3,045
1,689
2,009
6,759
16,420
$
47,979 $
7,197 $
5,950 $
9,845 $
24,889 $
95,860
(1) Due the nature of the account which include infinite payments for royalties and milestones to third parties the assumed liabilities reflect the discounted
amount. See Note 13(2)
F-41
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 15: - Financial Instruments
(Cont.)
b.
Financial risk factors (cont.)
Changes in liabilities arising from financing activities
December 31, 2024
January 1,
2024
Payments
Foreign
exchange
fluctuation
New
loans
and
leases
Business
combination Revaluation
Write off
December 31,
2024
U.S. Dollars in thousands
Contingent
consideration (1)
21,855 $
(3,000) $
- $
- $
- $
4,711 $
- $
23,566
Assumed
liabilities
46,375
(9,667)
-
-
-
3,370
-
40,079
Leases
8,822
(1,251)
128
3,432
-
-
(69)
11,062
Total
$
77,052 $
(13,918) $
128 $
3,432 $
- $
8,081 $
(69) $
74,707
(1) The contingent consideration fair value as of December 31, 2024, was based on an Option Pricing Method (OPM), “Monte Carlo Simulation” model.
In measuring the contingent consideration liability, the Company used an appropriate risk-adjusted discount rate of 11.5% and volatility of 14.19%.
totaled $23,566 thousand.
December 31, 2023
January 1,
2023
Payments
Foreign
exchange
fluctuation
New
loans
and
leases
Business
combination Revaluation
Write off
December 31,
2023
U.S. Dollars in thousands
Contingent
consideration (1)
23,534
(3,000)
-
-
-
1,321
-
21,855
Assumed
liabilities
61,016
(14,300)
-
-
-
(341)
-
46,375
Bank loans
17,407
(17,407)
-
-
-
-
-
-
Leases
3,193
(850)
(96)
6,682
-
-
(107)
8,822
Total
$
105,150 $
(35,557) $
(96) $
6,682 $
- $
980 $
(107) $
77,052
(1) The contingent consideration fair value as of December 31, 2023, was based on an Option Pricing Method (OPM), “Monte Carlo Simulation” model.
In measuring the contingent consideration liability, the Company used an appropriate risk-adjusted discount rate of 11.4% and volatility of 15.17%.
totaled $21,855 thousand.
c.
Fair value
The following table demonstrates the
carrying amount and fair value of the financial assets and liabilities presented in the financial
statements not at fair value:
Carrying Amount
Fair Value
December 31,
December 31,
2024
2023
2024
2023
U.S. Dollars in thousands
Assumed liabilities
40,079
46,375
37,676
46,468
Total Financial liabilities
$
40,079 $
46,375 $
37,676 $
46,468
F-42
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 15: - Financial Instruments
(Cont.)
c.
Fair value (cont.)
The fair value of the assumed liabilities
was based on standard pricing valuation model such as a discounted cash-flow model which
considers the present value of future cash flows
discounted by an interest rate that reflects market conditions (Level 3).
The carrying amount of cash and cash
equivalents, short-term bank deposits, trade and other receivables, trade and other payables
approximates their fair value, due to the
short-term maturities of the financial instruments.
d.
Classification of financial instruments by fair value hierarchy
Financial assets (liabilities) measured at fair value:
Financial assets (liabilities) measured at fair value:
Level 1
Level 2
Level 3 (1)
U.S. Dollars in thousands
December 31, 2024
Derivatives instruments
-
49
-
Contingent consideration (1)
-
-
(23,566)
$
- $
49 $
(23,566)
(1) For changes in Contingent Consideration see Note 15(b)
Financial assets (liabilities) measured at fair value:
Level 1
Level 2
Level 3 (1)
U.S. Dollars in thousands
December 31, 2023
Derivatives instruments
-
149
-
Contingent consideration (1)
-
-
(21,855)
$
- $
149 $
(21,855)
(1) For changes in Contingent Consideration see Note 15(b)
During 2024 and 2023 there was no transfer
due to the fair value measurement of any financial instrument from Level 1 to Level 2, and
furthermore, there were no transfers to or
from Level 3 due to the fair value measurement of any financial instrument.
Sensitivity tests and principal
work assumptions
The selected changes in the relevant
risk variables were determined based on management’s estimate as to reasonable possible changes in
these risk variables.
The Company has performed sensitivity
tests of principal market risk factors that are liable to affect its reported operating results or
financial position. The sensitivity
tests present the profit or loss in respect of each financial instrument for the relevant risk variable
chosen for that instrument as
of each reporting date. The test of risk factors was determined based on the materiality of the exposure of
the operating results or
financial condition of each risk with reference to the functional currency and assuming that all the other variables
are constant.
December 31,
2024
2023
U.S. Dollars in thousands
Sensitivity test to changes in foreign currency:
Gain (loss) from change:
5% increase in NIS
$
(852) $
(454)
5% decrease in NIS
$
852 $
454
5% increase in Euro
$
(56) $
(271)
5% decrease in Euro
$
56 $
271
F-43
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 15: - Financial Instruments
(Cont.)
e.
Linkage terms of financial liabilities by groups of financial instruments pursuant to IFRS 9:
December 31,
2024
2023
U.S. Dollars in thousands
In NIS:
Leases measured at amortized cost
$
6,025 $
6,275
$
6,025 $
6,275
In USD:
Contingent consideration at fair value through profit or loss
23,566
21,855
Assumed liabilities measured at amortized cost
40,079
46,375
Leases measured at amortized cost (1)
5,037
2,547
$
68,682 $
70,777
(1)
The balance, as of December 31, 2024, and December 31, 2023, includes short-term lease in the amount of $267 thousand and $134 thousand
respectively that was classified to other accounts receivables (refer to Note 14 for further)
f.
Derivatives and hedging:
Derivatives instruments not designated as hedging
The Company has foreign currency forward contracts designed to protect
it from exposure to fluctuations in exchange rates, mainly of
NIS and EUR, in respect of its trade receivables, trade payables. Foreign
currency forward contracts are not designated as cash flow
hedges, fair value or net investment in a foreign operation. These derivatives
are not considered as hedge accounting. As of December 31,
2024, and December 31, 2023, the fair value of the derivative instruments not
designated as hedging was a financial liability of $10
thousand and financial asset of $8 thousand, respectively. The open transactions
(Derivative contract which have not yet been settled) for
those derivatives were in an amount of $3,652 thousands and $9,149 thousands,
respectively.
Cash flow hedges:
As of December 31, 2024, and December
31, 2023, the Company held NIS/USD hedging contracts (cylinder contracts) designated as
hedges of expected future salaries expenses and
for expected future purchases from Israeli suppliers.
The main terms of these positions were set to match the terms of the
hedged items. As of December 31, 2024, and December 31, 2023,
the fair value of the derivative instruments designated as hedge accounting
was an asset of $59 thousand and $141 thousand respectively.
The open transactions (Derivative contract which have not yet been settled)
for those derivatives were in an amount of $562 thousand and
$389 thousand respectively.
Cash flow hedges of the expected salaries and suppliers’ expenses
as of December 31, 2024, and December 31, 2023 were estimated as
effective and accordingly a net unrecognized expenses in the amount of
$89 thousand and a net unrecognized income of $228 thousand,
respectively were accounted for as other comprehensive income. The ineffective
portion was allocated to finance expenses.
F-44
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 16: - Employee Benefit
Liabilities, Net
f.
Derivatives and hedging: (cont.)
Employee benefits consist of short-term
benefits and post-employment benefits.
Post-employment benefits:
According to the Israeli labor and Severance
Pay Laws, the Company is required to pay compensation to employees upon dismissal or
retirement or to make contributions in defined contribution
plans pursuant to Section 14 of the Israeli Severance Pay Law, as specified
below. The Company’s liability is accounted for as a
post-employment benefit only for those employees for which Section 14 of the
Israeli Severance Pay Law is not applicable to. The computation
of the Company’s employee benefit liability is made in accordance with
a valid employment contract, or a collective bargaining agreement
based on the employee’s salary and employment terms which establish
the entitlement to receive the compensation.
The post-employment employee benefits
are normally financed by contributions classified as defined benefit plans, as detailed below:
1.
Defined contribution deposit:
Israeli employees defined contribution
plan:
The Company’s agreements with some
of its employees are in accordance with Section 14 of the Israeli Severance Pay Law.
Contributions made by the Company in accordance with
Section 14 release the Company from any future severance liabilities in
respect of those employees. The expenses for the defined
benefit deposit in 2024, 2023 and 2022 were $1,050 thousand, $925
thousand, and $873 thousand, respectively.
U.S. employees defined contribution
plan:
Since August 2022, the Company’s
U.S. subsidiary has a 401(k) defined contribution plan covering certain employees in the
U.S. During the years ended December 31, 2024,
and December 31, 2023, the U.S. subsidiary recorded expenses for matching
contributions in the amount of $89 thousand and $62 thousand,
respectively.
2.
Defined benefit plans:
The Company accounts for the payment
of compensation as a defined benefit plan for which an employee benefit liability is
recognized and for which the Company deposits amounts
in a long-term employee benefit fund and in qualifying insurance
policies.
3.
Expenses recognized in comprehensive income (loss):
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Current service cost
$
208 $
194 $
223
Interest expenses, net
39
28
15
Total employee benefit expenses
247
222
238
Actual return on plan assets
$
400 $
50 $
(25)
F-45
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 16: - Employee Benefit
Liabilities, Net (Cont.)
f.
Derivatives and hedging: (cont.)
The expenses are presented in the Statement of Comprehensive
income (loss) as follows
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Cost of revenues
$
159 $
155 $
166
Research and development
20
22
24
Selling and marketing
39
33
27
General and administrative
9
23
21
$
227 $
233 $
238
4.
The plan liabilities, net:
December 31,
2024
2023
U.S. Dollars in thousands
Defined benefit obligation
$
4,813 $
4,399
Fair value of plan assets
4,304
3,778
Total liabilities, net
$
509 $
621
5.
Changes in the present value of defined benefit obligation
2024
2023
U.S. Dollars in thousands
Balance at January 1,
$
4,399 $
4,380
Interest costs
216
200
Current service cost
208
194
Past service cost
-
-
Benefits paid
(223)
(376)
Demographic assumptions
(84)
13
Financial assumptions
-
(91)
Past Experience
322
209
Currency Exchange
(25)
(130)
Balance at December 31,
$
4,813 $
4,399
6.
Plan assets
a)
Plan assets
Plan assets comprise of assets held
by long-term employee benefit funds and qualifying insurance policies.
F-46
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 16: - Employee Benefit
Liabilities, Net (Cont.)
b)
Changes in the fair value of plan assets
2024
2023
U.S. Dollars in thousands
Balance at January 1,
$
3,778 $
3,707
Expected return
184
172
Contributions by employer
165
173
Benefits paid
(195)
(206)
Demographic assumptions
(2)
-
Financial assumptions
-
-
Past Experience
402
50
Currency exchange
(28)
(118)
Balance at December 31,
$
4,304 $
3,778
7.
The principal assumptions underlying the defined benefit plan
2024
2023
2022
%
Discount rate of the plan liability
5.4
5.3
5.1
Future salary increases
3.0
3.0
3.0
The sensitivity analyses below have
been determined based on reasonably possible changes of the principal assumptions
underlying the defined benefit plan as mentioned above,
occurring at the end of the reporting period.
If the discount rate
would be one percent higher or lower, and all other assumptions were held constant, the defined benefit
obligation would decrease by
$81 thousand or increase by $119 thousand, respectively.
If the expected salary
growth would increase or decrease by one percent, and all other assumptions were held constant, the
defined benefit obligation would
increase by $113 thousand or decrease by $77 thousand, respectively.
F-47
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 17: - Contingent Liabilities
and Commitments
a.
On August 23, 2010, the Company entered into a 30-year collaboration agreement with Baxter Healthcare Corporation (“Baxter”) with
respect for granting of the distribution rights for GLASSIA. During 2015, Baxter assigned all its rights under the collaboration agreement
to Baxalta US Inc. (“Baxalta”) which was acquired during 2016 by Shire plc. (“Shire”), which is now part of Takeda (“Takeda” and in
these consolidated financial statements Baxter, Baxalta and Shire will be referred to as “Takeda”).
The collaboration agreement consists
of three main agreements (1) an Exclusive Manufacturing, Supply and Distribution agreement for
GLASSIA in the United States, Canada,
Australia and New Zealand (the “Territory” and the “Distribution Agreement”, respectively); (2)
Technology License
Agreement for the use of the Company’s knowhow and patents for the production, continued development and sale
of GLASSIA by Takeda
(the “License Agreement”) in the Territory; and (3) A Paste Supply Agreement for the supply by Takeda of
plasma derived fraction
IV-1 to be used by the Company for the production of GLASSIA (the “Raw Materials Supply Agreement”).
Pursuant to the agreements, the
Company was entitled to certain upfront and milestone payments at a total amount of $45 million, all of
which were received and
accounted for as income through December 31, 2021, and for a minimum commitment of Takeda to acquire
GLASSIA produced by the Company
over the term of the Distribution Agreement. In addition, upon initiation of sales of GLASSIA
manufactured by Takeda, the Company
would be entitled to royalty payments at a rate of 12% on net sales of Glassia through August
2025, and at a rate of 6% thereafter
until 2040, with a minimum of $5 million annually (the “Royalty Payments”).
During 2021, the Company terminated the production and supply of GLASSIA
to Takeda and Takeda initiated its own production of the
product for distribution in the territory. In addition, during 2022, the Company
transferred to Takeda the U.S. Biologics License
Application (BLA) of the product, in consideration for a $2 million payment from Takeda,
which was paid by Takeda and accounted for
as income during the first quarter of 2022.
Commencing 2022, the Company collected royalty payments from Takeda
(per the agreement term as described above). For the years
ended December 31, 2024, 2023 and 2022 the Company accounted for a total of
$16.9 million, $16.1 million and $12.2 million from
sales-based royalty income from Takeda, respectively.
Pursuant to the Distribution Agreement,
Takeda is responsible to conduct any required additional clinical studies required to obtain or
maintain GLASSIA’s marketing authorization
in the Territory. Under certain conditions, the Company will be required to participate in
the funding of these clinical studies in a
total amount not to exceed $10 million.
Pursuant to the Raw Material Supply Agreement
Takeda undertook to provide the Company, free of charge, all quantities of plasma
derived fraction IV-1 required by the Company for manufacturing
GLASSIA to be sold to Takeda for distribution in the Territory. The
Company accounted for the fair value of the plasma derived fraction
IV-1 used and sold as revenues and charges the same fair value to
cost of revenue. In addition, the Company has the right to acquire from
Takeda plasma derived fraction IV-1 for its continued
development and for the production, sale and distribution of GLASSIA by the Company
outside the Territory.
F-48
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 17: - Contingent Liabilities
and Commitments (Cont.)
b.
In November 2006, the Company entered into an agreement with PARI GmbH (“PARI”) in connection with a supply by PARI of a certain
medical device required for the development of the Company’s Inhaled AAT product. Pursuant to the agreement, the Company was
licensed to use developments made by PARI. Furthermore, PARI will provide the Company certain quantities of devices for carrying out
clinical trials, free of charge. If the development is successful, and the underlining product obtains required marketing authorization, the
Company will pay PARI royalties based on sales of the devices through the later of the device patents expiration period or 15 years from
the first commercial sale of the Company’s the Inhaled AAT product.
On expiration of the royalty period,
the license will become non-exclusive, and the Company shall be entitled to use the rights granted to
it pursuant to the agreement without
paying royalties or any other compensation. In addition, and according to a mechanism set in the
agreement, PARI would be required to
pay royalties to the Company of the total net sales of the device exceeding a certain amount,
through the later of the device patents
expiration period or 15 years from the first commercial sale of the Company’s Inhaled AAT
product.
In February 2008, the parties executed
an amendment to the agreement according to which the exclusive global license granted to the
Company was expanded to two additional indications.
The royalties’ obligations mentioned above, are applicable to all indications.
In addition, the parties entered into
a commercialization and supply agreement, which ensures long-term regular supply of the device,
including spare parts.
In May 2019, the Company signed a Clinical
Study Supply Agreement (“CSSA”) with PARI for the supply of the required quantities of
controller kits and the web portal
associated with PARI’s device required for the Company’s continued clinical trials with respect to the
Inhaled AAT product.
The CSSA is a supplement agreement to the commercialization and supply agreement and will expire upon the
expiration or termination of
such agreement.
c.
In July 2011, the Company entered into a strategic collaboration agreement
with Kedrion Biopharma Inc. (“Kedrion”) for clinical
development, marketing, distribution, and sales in the United States
of the Company’s rabies immune globulin (Human) under the trade
name KEDRAB. The product is manufactured and marketed by the
Company in other countries under a different trade name KAMRAB.
The Company obtained U.S marketing authorization from the FDA for
KEDRAB in August 2017, and the commercial launch of the
product in the United States was initiated at the beginning of 2018.
In October 2016, the parties entered
into an amendment to the agreement pursuant to which the parties agreed to conduct a required post-
marketing-commitment clinical study
which was initiated in March 2017 and finalized during 2020. The cost of the study was equally
shared between the parties.
In December 2023, we entered into a binding
memorandum of understanding with Kedrion for the amendment and extension of the
distribution agreement between the parties, which represents
the largest commercial agreement secured by us to date. Subsequently, in
January 2025, we entered into the fifth amendment to the supply
and distribution agreement, which memorializes the agreements and
undertakings set forth in a binding memorandum of understanding, along
with additional terms and conditions. Under these agreements,
during the first four years of the eight-year term that began in January
2024, Kedrion committed to purchasing minimum quantities of
KEDRAB, with aggregate revenues for us of approximately $180 million for such
four-year period.
F-49
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 17: - Contingent Liabilities
and Commitments (Cont.)
d.
In July 2019, the Company entered into a 7-year Master Clinical Services
Agreement with a third party for the provision of certain
clinical research services and other tasks to be performed by such third party,
in connection with the Company’s Phase 3 clinical study for
its inhaled AAT product.
e.
In December 2019, the Company entered into an agreement with Alvotech
ehf. (“Alvotech”), a global biopharmaceutical company, to
commercialize Alvotech’s portfolio of six biosimilar product
candidates in Israel, upon receipt of regulatory approval from the IL MOH.
Pursuant to the agreement the Company is obligated to
pay Alvotech certain milestone payments, in advance of the launch of the six
biosimilar in Israel. In February 2022, the agreement
was extended to include two additional biosimilar products.
f.
On January 14, 2021, the Company entered into an agreement with undisclosed international pharmaceutical companies to commercialize
one of the distribution products, in Israel. Pursuant to the agreement the Company is obligate to pay royalties in the amount of 24% out of
the net revenue from the sale of the product in the Israeli market.
g.
See Note 13a(1) for of the Company’s obligation to pay contingent consideration subject the achievement of sales thresholds.
See Note 13a(2) for the Company’s
assumed liability for certain of Saol’s obligations for the future payment of royalties.
h.
In May 2022, the Company terminated a distribution agreement with a
third-party engaged to distribute the Company’s propriety
products in Russia and Ukraine (the “Distributor”) and a power
of attorney granted in connection with such distribution agreement to an
affiliate of the Distributor (the “Affiliate”). On
June 13, 2023, the Affiliate filed a Statement of Claim with the tribunal of first instance in
Geneva, seeking alleged damages in the
total amount of $6.7 million. The Company filed a motion with the tribunal of first instance
challenging its jurisdiction over the Affiliate’s
claims, submitting that such claims should have been brought before an arbitral tribunal, as
contractually agreed between the parties.
During December 2024, the Company was advised by the Geneva court that it possesses all the
necessary information to decide on its jurisdiction
and its decision is expected in the coming months. Until the tribunal of first instance in
Geneva rules on the motion, the Affiliate’s
claims will not be heard. To date, it is not possible to assess the prospects of the claim against
the Company and any potential liabilities
and impact on the Company’s business.
F-50
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 18: - Guarantees and
Charges
a.
The Company provided a bank guarantee in the amount of $315 thousand mainly in favor of the lessor of its leased office facility in
Rehovot, Israel, as guarantee for meeting its obligations under the lease agreement.
b.
The Company provided a bank guarantee in the amount of $247 thousand
as part of the terms and conditions of a tender. In order to
obtain the bank guarantee the Company deposited the full amount of the bank
guarantee in a collateral account. Refer to Note 7 for
further information.
c.
The Company provided a security deposit totaling $444 thousand in accordance
with the terms and conditions of the lease agreements for
its Houston and San Antonio plasma collection centers. These deposits serve
as a guarantee to ensure compliance with the Company’s
obligations under these agreements. Pursuant to the Houston center lease
agreement, the Company is entitled for an annual partial
reimbursement of $40 thousand of the security deposit for each year of the initial
10-year lease period.
Note 19: - Equity
a.
Share capital
December 31, 2024
December 31, 2023
Authorized
Outstanding
Authorized Outstanding
Ordinary shares of NIS 1 par value
70,000,000
57,505,031
70,000,000
57,479,528
b.
Changes in share capital:
Issued and outstanding share capital:
Number of
shares
Balance as of January 1, 2023
44,832,843
Issue of shares
12,631,579
Exercise of options into share units
2,662
Vesting of restricted shares units
12,444
Balance as of December 31, 2023
57,479,528
Exercise of options into shares units
23,628
Vesting of restricted shares units
1,875
Balance as of December 31, 2024
57,505,031
F-51
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note
19: - Equity (Cont.)
c.
Rights attached to Shares
Voting rights at the shareholders general
meeting, rights to dividend, rights in case of liquidation of the Company and rights to nominate
directors.
d.
Share options and restricted shares units
During 2024 and 2023, 189,154 and 42,175
share options, respectively, were exercised, on a net exercise basis, into 23,628 and 2,662
ordinary shares of NIS 1 par value each and
1,875 and 12,444 restricted shares units were vested, respectively. The total consideration
from such exercise totaled $7 and $4 thousand
for 2024 and 2023, respectively.
For additional information regarding
options and restricted shares units granted to employees and management in 2024, refer to Note 20
below.
e.
Capital management in the Company
The Company’s goals in its capital
management are to preserve capital ratios that will ensure stability and liquidity to support business
activity and create maximum value
for shareholders.
f.
Issuance of ordinary shares by the Company
On November 21, 2019, FIMI, the leading
private equity firm in Israel acquired from third parties 5,240,956 ordinary shares at a price of
$6.00, representing ownership of approximately
13% of the Company’s then outstanding shares.
On February 10, 2020, the Company consummated
a private placement with FIMI, pursuant to which the Company issued 4,166,667
ordinary shares at a price of $6.00 per share, for total
gross proceeds of $25,000 thousand. Upon closing of the private placement, FIMI’s
aggregate ownership represented approximately
21% of the Company’s then outstanding shares.
On September 7, 2023, the Company consummated
a private placement with FIMI, pursuant to which the Company issued 12,631,579
ordinary shares at a price of $4.75 per share (which represented
the average closing price of the Company’s shares on NASDAQ during
the 20 trading days prior to the date of execution of the private
placement), for total gross proceeds of $60,000 thousand. Following the
closing of the private placement, FIMI beneficially owned approximately
38% of the Company’s outstanding ordinary shares and became
a controlling shareholder of the Company, within the meaning of the
Israeli Companies Law, 1999.
Concurrently with the execution of
the share purchase agreement, the Company entered into an amended and restated registration rights
agreement with FIMI pursuant to which,
among other things, the Company undertook to file with the U.S. Securities and Exchange
Commission a registration statement registering
the resale of all of the ordinary shares held by FIMI, per its request, at any time
commencing after the lapse of six months following
the closing of the private placement.
Ms. Lilach Asher-Topilsky, the Chairman
of the Board of Directors, of the Company, and Messrs. Ishay Davidi and Uri Botzer, members
of the Company’s Board of Directors,
are executives of FIMI.
F-52
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 20: - Share-Based Payment
On July 24, 2011, the Company’s
Board of Directors adopted the 2011 Israeli Share Option Plan. In September 2016, the Company’s Board of
Directors approved an amendment
to the plan, to include the issuance of restricted shares units (“RSU”) under the plan and renamed it the Israeli
Share Award
Plan (“2011 Plan”). In August 2021, the Company’s Board of Directors approved a 10-year extension of the 2011 Plan,
through
August 9, 2031, and adopted a few additional amendments to the 2011 Plan. The 2011 Plan was further amended in October 2022.
Options and RSU’s granted under
the 2011 Plan, prior to January 2020, generally vest over a four-year period following the date of the grant in 13
installments: 25%
on the first anniversary of the grant date and 6.25% at the end of each quarter thereafter. As of 2020, options and RSUs granted
under
the 2011 Plan generally vest in four equal annual installments of 25% each.
In February 2022, the Company’s
Board of Directors adopted the U.S. Taxpayer Appendix to the 2011 Plan (the “U.S. Appendix”), which
provides for the grant
of options and RSU to persons who are subject to U.S. federal income tax. The U.S. Appendix provides for the grant to U.S.
employees
of options that qualify as incentive stock options (“ISOs”) under the U.S. Internal Revenue Code of 1986, as amended. The
U.S.
Appendix was approved by our shareholders at the annual general meeting held in December 2022.
a.
Expense recognized in the financial statements
The share-based compensation expense
that was recognized for services received from employees and members of the Company’s Board
of Directors is presented in the following
table:
For the Year Ended December
31
2024
2023
2022
U.S. Dollar in thousands
Cost of revenues
$
159 $
249 $
308
Research and development
96
167
204
Selling and marketing
177
238
254
General and administrative
435
660
372
Total share-based compensation
$
867 $
1,314 $
1,138
F-53
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 20: - Share-Based Payment
(Cont.)
b.
Share options granted:
On February 29, 2024, the Company’s
Board of Directors approved the grant of options to purchase up to 27,468 ordinary shares of the
Company under the 2011 Plan and the US
Appendix which were allocated as follows:
Under the Israeli Share Option Plan:
-
20,800 options to purchase the ordinary shares of the Company, at an exercise price of NIS 23.91 (USD 6.67) per share. The fair
value of the options calculated on the date of grant using the binomial option valuation model was estimated at $48 thousands.
Under the US Appendix:
-
6,668 options to purchase the ordinary shares of the Company, at an exercise price of USD 6.62 per share. The fair value of the
options calculated on the date of grant using the binomial option valuation model was estimated on the date of grant at $18
thousands.
On July 21, 2024, the Company’s
Board of Directors approved the grant of options to purchase up to 15,081 ordinary shares of the
Company, under the 2011 Plan and the
US Appendix which were allocated as follows:
Under the Israeli Share Option Plan:
-
9,049 options to purchase the ordinary shares of the Company, at an exercise price of NIS 22.01 (USD 6.06) per share. The fair
value of the options calculated on the date of grant using the binomial option valuation model was estimated at $19 thousands.
Under the US Appendix:
-
6,032 options to purchase the ordinary shares of the Company, at an exercise price of USD 6.07 per share. The fair value of the
options calculated on the date of grant using the binomial option valuation model was estimated on the date of grant at $15
thousands.
F-54
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 20: - Share-Based Payment
(Cont.)
c.
Change of Awards during the Year
The following table lists the number
of share options, the weighted average exercise prices of share options and changes in share options
grants during the year:
Under the Israeli Share Option Plan:
2024
2023
2022
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
In NIS
In NIS
In NIS
Outstanding at beginning of year
3,022,098
19.81
3,022,314
19.91
1,504,678
20.38
Granted
29,849
23.33
321,264
18.60
1,833,200
19.27
Exercised
(189,154)
18.49
(42,175)
19.04
(8,325)
16.47
Forfeited
(295,305)
20.90
(279,305)
19.57
(307,239)
19.14
Outstanding at end of year(1)
2,567,488
19.81
3,022,098
18.82
3,022,314
19.91
Exercisable at end of year(2)
1,518,437
20.25
1,412,709
19.83
1,049,329
20.38
The weighted average remaining
contractual life for the share options
3.49
3.93
4.67
(1) The range of exercise prices for share options outstanding
as of December 31, 2024, were NIS 16.53- NIS 29.68. Exercise is by net exercise method.
(2) The weighted average exercise price of the exercisable options at December 31, 2024, 2023 and 2022 translated into U.S. dollars as of the relevant
exchange rate on those days is $5.55, $5.62, $5.79, respectively.
Under the US Appendix:
2024
2023
2022
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
In USD
In NIS
In NIS
Outstanding at beginning of year
247,883
5.56
225,500
5.55
-
-
Granted
12,700
6.36
22,383
5.64
243,600
5.57
Exercised
-
-
-
-
-
-
Forfeited
(10,000)
5.36
-
-
(18,100)
5.82
Outstanding at end of year(1)
250,583
5.61
247,883
5.56
225,500
5.55
Exercisable at end of year
113,345
5.56
56,375
5.55
-
-
The weighted average remaining
contractual life for the share options
4.06
5.00
5.90
(1) The
range of exercise prices for share options outstanding as of December 31, 2024, were USD 4.57- USD 6.62 Exercise is by net exercise
method.
F-55
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 20: - Share-Based Payment
(Cont.)
d.
The following table lists the number of RSUs and changes in RSUs grants during the year:
Number of RSUs
2024
2023
2022
Outstanding at beginning of year
1,875
14,705
49,561
Granted
-
-
-
End of restriction period
(1,875)
(12,444)
(31,608)
Forfeited
-
(386)
(3,248)
Outstanding at end of year
-
1,875
14,705
The weighted average remaining contractual life for the restricted share units
-
0.25
0.96
e.
Measurement of the fair value of share options:
The Company uses the binomial model when
estimating the grant date fair value of equity-settled share options. The measurement was
made at the grant date of equity-settled share
options.
The following table lists the inputs
to the binomial model used for the fair value measurement of equity-settled share options for the
above plan.
2024
2023
2022
Dividend yield (%)
-
-
-
Expected volatility of the share prices (%)
29-38
26-38
23-40
Risk-free interest rate (%)
3.74-4.87
3.76-4.70
0.4-3.55
Contractual term of up to (years)
6.5
6.5
6.5
Weighted average share prices (NIS)
20.82-22.77 16.10-19.46 13.6-18.41
Expected average forfeiture rate (%)
8.5
8.5
8.5
Under the US Appendix:
2024
2023
2022
Dividend yield (%)
-
-
-
Expected volatility of the share prices (%)
38-43
34-47
27-47
Risk-free interest rate (%)
3.04-6.11
3.76-5.03
0.91-3.54
Contractual term of up to (years)
6.5
6.5
6.5
Weighted average share prices (USD)
5.88-6.30
4.22-5.55
4.8-5.37
Expected average forfeiture rate (%)
8.5
5-8.5
1.9-8.5
F-56
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 21: - Taxes on Income
a.
Tax laws applicable to the Company
Law for the Encouragement of Industry
(Taxes), 1969
The Law for the Encouragement of Industry
(Taxes), 1969 (the “Encouragement of Industry Law”), provides several tax benefits for
“Industrial Companies.”
Pursuant to the Encouragement of Industry Law, a company qualifies as an Industrial Company if it is a resident
of Israel and at least
90% of its income in any tax year (other than income from certain government loans) is generated from an
“Industrial Enterprise”
that it owns. An Industrial Enterprise is defined as an enterprise whose principal activity, in a given tax year, is
industrial activity.
An Industrial Company is entitled to certain
tax benefits, including: (i) a deduction of the cost of purchases of patents, know-how and
certain other intangible property rights (other
than goodwill) used for development or promotion of the Industrial Enterprise in equal
amounts over a period of eight years, beginning
from the year in which such rights were first used, (ii) the right to elect to file
consolidated tax returns, under certain conditions,
with additional Israeli Industrial Companies under its control, and (iii) the right to
deduct expenses related to public offerings in
equal amounts over a period of three years beginning from the year of the offering.
Eligibility for benefits under the
Encouragement of Industry Law is not contingent upon the approval of any governmental authority. The
Company believes that it currently
qualifies as an industrial company within the definition of the Industry Encouragement Law. The
Company cannot confirm that the Israeli
tax authorities will agree that the Company qualifies, or, if qualified, that it will continue to
qualify as an industrial company or
that the benefits described above will be available to the Company in the future.
Law for the Encouragement of Capital
Investments, 1959
Tax benefits prior to Amendment
60
The Company’s facilities in Israel
have been granted Approved Enterprise status under the Law for the Encouragement of Capital
Investments, 1959, commonly referred to as
the “Investment Law”. The Investment Law provides that capital investments in a production
facility (or other eligible assets)
may be designated as an Approved Enterprise.
Under the Approved Enterprise programs,
a company is eligible for certain benefits such as governmental grants and tax incentives. The
benefits period is limited to the earlier
of 12 years from completion of the investment or commencement of production (“Year of
Operation”), or 14 years from the year
in which the certificate of approval was obtained.
The Company’s benefit period
under the Approved Enterprise programs ended by the end of 2017.
F-57
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 21: - Taxes on Income
(Cont.)
a.
Tax laws applicable to the Company (cont.)
Tax benefits under Amendment 60
On April 1, 2005, an amendment to the
Investment Law was affected (“Amendment 60”). The amendment revised the criteria for
investments qualified to receive tax
benefits. An eligible investment program under the amendment will qualify for benefits as a
Privileged Enterprise (rather than the previous
terminology of Approved Enterprise).
In May 2012, the Company received a Tax
Ruling from the Israeli Tax Authority that its activity is an industrial activity, and the
Company will be eligible for the status of
a Privileged Enterprise, provided that it meets the requirements under the ruling. Pursuant to
the Tax Ruling, the Year of Election was
2009. The Company also subsequently elected 2012 as a Year of Election. Through December
31, 2023, the Company did not utilize the tax
benefits under its Privileged Enterprise and those expired at the end of 2023.
In January 2015, the Company obtained
a ruling from the ITA pursuant to which royalties-based income related to GLASSIA will be
considered “Privileged Income” (within the meaning of the Investment Law), subject
to meeting certain conditions detailed in the ruling.
Amendment 68 to the Encouragement Law:
As of January 1, 2011, new legislation
amending the Investment Law was affected. Pursuant to Amendment 68 a new status of “Preferred
Company” and “Preferred
Enterprise”, replacing the then existing status of “Privileged Company” and “Privileged Enterprise”. A
Preferred Company is an industrial company owning a Preferred Enterprise which meets certain conditions (including a minimum
threshold
of 25% export). However, under this new legislation the requirement for a minimum investment in productive assets was
cancelled.
Under Amendment 68, a uniform corporate
tax rate will apply to all qualifying income of the Preferred Company, as opposed to the
former law, which was limited to income from
the Approved Enterprises during the benefits period.
The company believes that it satisfies the requirements of the Preferred
Company status, pursuant to Amendment 68, and while it has not
yet utilized the benefits under Amendment 68, it may do so in subsequent
fiscal years.
Amendment 73 to the Encouragement Law:
Amendment 73 to the Encouragement Law
also prescribes special tax tracks for technological enterprises, which became effective in
2017, as follows: Preferred technological
enterprise, which is defined in the Encouragement Law as a company that owns the enterprise
and is a member of a group whose total consolidated
revenues are less than NIS 10 billion in the tax year, will be subject to tax at a rate
of 12% on profits deriving from intellectual
property (in development area A - a tax rate of 7.5%). Special preferred technological
enterprise which is a member of a group whose
total consolidated revenues exceed NIS 10 billion in the tax year will be subject to tax at
a rate of 6% on preferred income from the
enterprise, regardless of the enterprise’s geographical location. Any dividends distributed to
“foreign companies”,
as defined in the Encouragement Law, deriving from income from the technological enterprises will be subject to
tax at a rate of 4%,
subject to the conditions prescribed in Section 51Z to the Encouragement Law.
The Company evaluated the effect of
the adoption of Amendment 73 on its tax position, and as of the date of the approval of the financial
statements, the Company did not
apply for the benefits under Amendment 73. The Company may elect to apply for these benefits in the
future.
b.
Tax rates applicable to the Company (other than the applicable preferred
tax)
The Israeli corporate income tax rate
was 23% since 2018.
c.
Tax assessments
The Company has finalized tax assessments
through the end of tax year 2019.
F-58
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 21: - Taxes on Income
(Cont.)
d.
Taxation of the subsidiaries:
Kamada Inc and Kamada Plasma LLC
(“US subsidiaries”) are incorporated in the United States and are subject to U.S. Federal and State
tax laws and
Franchise Tax. The two subsidiaries file a joint tax return.
On December 22, 2017, the Tax Cuts
and Jobs Act (the “Act”) was signed into law. Among other things, the Act reduces the corporate
tax rate to 21% from 35%.
On February 16, 2022, the Company incorporated
KI Biopharma LLC, as a wholly owned subsidiary of Kamada Ltd. KI Biopharma LLC
is a disregarded (tax transparent) entity for U.S. tax
purposes.
e.
Carry forward losses for tax purposes and other temporary differences
As of December 31, 2024, the Company has
carried forward losses and other temporary differences in the amount of $13,419 thousand.
Final tax assessments for the years 2020 onwards
could have an impact on the balance of carry forward tax losses.
As of December 31, 2024, the US subsidiaries
had carried forward losses and other temporary differences in the amount of $356
thousand.
f.
Uncertain tax positions
The Company analyzed uncertainty involving income taxes on its financial
statements and whether it has any potential impact on the
financial statements. As of December 31, 2024, and 2023, the application of
IFRIC 23 did not have a material effect on the financial
statements.
g.
Deferred taxes:
As of December 31, 2024, the Company recorded
deferred tax asset, net at an amount of $488 thousands representing utilization of
previously unrecognized tax losses and other deductible
temporary differences as the Company considered it probable that future taxable
profits will be available against which they can be utilized.
As a result, the Company recognized deferred tax income of $488 thousands
of which $16 thousands was recognized in equity.
h.
Major components of deferred tax assets and deferred tax liabilities:
Year
ended
December 31
2024
U.S. Dollars
in
thousands
Deferred tax assets:
Carryforward tax losses
$
2,281
Research and development expenses
2,511
Accrued expenses
481
Property plant and equipment and lease, net
689
Other
112
Total Deferred tax assets
$
6,074
Deferred tax liability:
Intangible assets and goodwill
(5,567)
Other
(19)
Deferred tax liability
$
(5,586)
Deferred tax assets, net
$
488
F-59
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 21: - Taxes on Income
(Cont.)
i.
Taxes on income
Year ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Current taxes
$
209 $
145 $
62
Deferred tax income
(1,337)
-
-
Taxes with respect of prior years
-
-
-
Taxes on income
$
(1,128) $
145 $
62
j.
Theoretical tax
2023-2022
The reconciliation between the
statutory tax rate and the effective tax rate as recorded in profit or loss for the years ended December
31, 2023, and 2022 does not
provide significant information, mainly because the Company did not recognize deferred taxes, and
therefore is not presented.
2024
The table below represent the reconciliation between the statutory
tax rate and the effective tax rate as recorded in profit or loss
Year ended
December 31
2024
U.S. Dollars in
thousands
Gain before taxes on income
$ 13,334
Statutory tax rate
23%
Tax (tax benefit) computed at the statutory tax rate
3,067
Increase (decrease) in taxes resulting from permanent differences - the tax effect:
Effect of creating deferred taxes at a rate different from the primary tax rate
177
Nondeductible expenses for tax purposes
2,095
Unrecognized temporary differences
158
Utilization of tax losses and benefits from prior years for which deferred taxes were not created
(4,955)
Effect of change on current and deferred tax assets
(1,490)
Difference between measurement basis of income/expenses for tax purposes and measurement basis of income/expenses for financial
reporting purposes
(78)
Other
(102)
Tax benefit
$
1,128
F-60
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note
22: - Supplementary Information to the Statements of Profit and Loss
a.
Additional information about revenues
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Revenues from major customers each of whom amount to 10% or more, of total revenues
Customer A(1)
$
49,958 $
32,800 $
16,195
Customer B(2)
16,882
16,129
14,205
Customer C(3)
12,234
9,230
12,255
$
79,074 $
58,159 $
42,655
(1) Revenue
is attributed to the Proprietary segment. Refer to Note 17 (c) for more information.
(2) Revenue
is attributed to the Proprietary segment. Refer to Note 17 (a) for more information.
(3) Customer C for the year ended December 31, 2024, is different than
Customer C for the years ended December 31, 2023, and 2022.
b.
Revenues based on the location of the customers, are as follows:
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
U.S.A
$
100,504 $
73,741 $
65,296
Israel
25,012
31,296
32,031
Latin America
18,606
12,928
11,293
Canada
9,457
11,162
10,555
Europe
4,936
7,088
5,277
Asia
2,376
6,147
4,581
Others
62
157
306
Total Revenue
$
160,953 $
142,519 $
129,339
F-61
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 22: - Supplementary
Information to the Statements of Profit and Loss (Cont.)
c.
Cost of goods sold
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Cost of materials
$
46,673 $
70,308 $
53,666
Salary and related expenses
17,820
16,330
14,967
Subcontractors
6,302
6,354
4,673
Depreciation and amortization (1)
9,274
9,000
8,553
Energy
1,390
1,383
1,365
Other manufacturing expenses
1,812
1,235
1,785
Total Cost of goods sold before Inventory change
$
83,271 $
104,610 $
85,009
Decrease (increase) in inventories
7,715
(17,581)
(2,373)
Total Cost of goods sold
$
90,986 $
87,029 $
82,636
(1) Including
amortization of intangible assets in the amount of $5,376 for each of the years ended December 31, 2024, 2023 and 2022.
d.
Research and development
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Salary and related expenses
$
5,621 $
5,110 $
5,608
Subcontractors
5,354
4,677
4,216
Materials and allocation of facility costs
2,693
2,971
2,538
Depreciation and amortization
648
586
574
Others
869
589
236
Total Research and development
$
15,185 $
13,933 $
13,172
e.
Selling and marketing
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Salary and related expenses
$
5,916
4,907
4,047
Packing, shipping and delivery
1,612
1,366
1,484
Marketing and advertising
3,830
2,634
3,676
Registration and marketing fees
3,705
4,362
3,463
Depreciation and amortization (1)
2,085
2,090
2,056
Others
1,280
834
558
Total Selling and marketing
$
18,428 $
16,193 $
15,284
(1)
Including amortization of intangible assets in the amount of $1,807 for each of the years ended December 2024 and 2023, and 2022.
F-62
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 22: - Supplementary
Information to the Statements of Profit and Loss (Cont.)
f.
General and administrative
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Salary and related expenses
$
5,811 $
5,283 $
4,455
Employees welfare
1,608
1,337
1,299
Professional fees and public company expenses
4,290
4,305
4,213
Depreciation, amortization and impairment
1,211
1,035
973
Information technology related expenses
1,772
1,201
905
Others
1,010
1,220
958
Total General and administrative
$
15,702 $
14,381 $
12,803
g.
Financial (expense) income
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Financial income
Interest income from cash deposit
$
2,118 $
588 $
91
Financial expense
Revaluation of long term liabilities
(8,081)
(980)
(6,266)
Fees and interest expense to financial
institutions
(660)
(1,298)
(914)
Financial income and (expense)
Derivatives instruments measured at fair value
(139)
149
548
Translation differences of financial assets
and liabilities
45
(94)
(250)
Total Financial (expense) income
$
(6,717) $
(1,635) $
(6,791)
F-63
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 23: - Income (loss)
Per Share
a.
Details of the number of shares and income (loss) used in the computation of income (loss) per share
Year Ended December 31,
2024
2023
2022
Weighted
Number of
Shares
Income
Attributed to
equity holders
of the
Company
Weighted
Number of
Shares
Income
Attributed to
equity holders
of the
Company
Weighted
Number of
Shares
Income
Attributed to
equity holders
of the
Company
U.S. Dollars
in thousands
U.S. Dollars
in thousands
U.S. Dollars
in thousands
For the computation of basic income (loss)
57,487,248
14,462
48,830,479
8,284
44,815,248 $
(2,321)
Effect of potential dilutive ordinary shares
329,903
4,845,035
41,328
-
For the computation of diluted income
(loss)
57,817,151
14,462
53,675,514
8,284
44,856,576 $
(2,321)
b.
The computation of the diluted income per share for the years ending
December 31, 2024, 2023 and 2022 considered the options and
RSUs due to their dilutive effect.
Note
24: - Operating Segments
a.
General
The operating segments are identified
based on information that is reviewed by the chief operating decision makers (“CODM”) to make
decisions about resources to
be allocated and assess its performance. Accordingly, for management purposes, the Company is organized
into operating segments based
on the products and services of the business units and has two operating segments as follows:
Proprietary Products Manufacturing, sales and distribution of plasma-derived protein therapeutics.
Distribution
Distribute imported drug products in Israel, which are manufactured
by third parties.
Segment performance is evaluated based
on revenues and gross profit in the financial statements.
The segment results reported to the
CODM include items that are allocated directly to the segments and items that can be allocated on a
reasonable basis. Items that were
not allocated, mainly the Company’s corporate office, research and development costs, sales and
marketing costs, general and administrative
costs and financial costs (consisting of finance expenses and finance income and including
fair value adjustments of financial instruments),
are managed on a Company basis.
The segment liabilities do not include loans and financial liabilities
as these liabilities are managed on a Company basis. The Company’s
CODM does not regularly review asset information by segments and, therefore,
the Company does not report asset or liability
information by segment.
F-64
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 24: - Operating Segments
(Cont.)
b.
Reporting on operating segments
Proprietary
Products
Distribution
Total
U.S. Dollars in thousands
Year Ended December 31, 2024
Revenues
$
141,447 $
19,506 $
160,953
Cost of revenues (1)
73,708
17,278
90,986
Gross profit
$
67,739 $
2,228 $
69,967
Unallocated corporate expenses
(49,916)
Finance income, net
(6,717)
Income before taxes on income
$
13,334
Proprietary
Products
Distribution
Total
U.S Dollars in thousands
Year Ended December 31, 2023
Revenues
$
115,458 $
27,061 $
142,519
Cost of revenues (1)
63,342
23,687
87,029
Gross profit
$
52,116 $
3,374 $
55,490
Unallocated corporate expenses
(45,426)
Finance income, net
(1,635)
Income before taxes on income
$
8,429
Proprietary
Products
Distribution
Total
U.S. Dollars in thousand
Year Ended December 31, 2022
Revenues
$
102,598 $
26,741 $
129,339
Cost of revenues (1)
58,229
24,407
82,636
Gross profit
$
44,369 $
2,334 $
46,703
Unallocated corporate expenses
(42,171)
Finance expense, net
(6,791)
Income before taxes on income
$
(2,259)
(1) For
amortization expenses included in costs of revenues from proprietary products see Note 22(c); for inventory impairment, included mainly
in costs
of revenues from proprietary products see Note 8.
Note 25: - Balances and
Transactions with Related Parties
a.
Balances with related parties
December 31,
2024
December 31,
2023
U.S. Dollars in thousands
Trade payables
$
125 $
96
Other accounts payables
$
95 $
45
F-65
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 25: - Balances and
Transactions with Related Parties (Cont.)
b.
Transactions with employed/directors that accounts as related parties
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Remuneration of directors not
employed by the Company or on its behalf
$
400 $
548 $
331
c.
Transactions with key executive personnel (including non-related parties)
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Salary and Related Expenses
$
3,862 $
3,771 $
3,590
Share-based payment
438
728
547
Total
$
4,300 $
4,499 $
4,137
d.
Transactions with related parties
Year Ended December 31,
2024
2023
2022
U.S. Dollars in thousands
Revenues
$
- $
2,676 $
5,298
Cost of Goods Sold
$
29 $
7 $
19
General and administrative expenses
$
159 $
223 $
214
F-66
Kamada Ltd. and subsidiaries
Notes to the Consolidated Financial Statements
Note 25: - Balances and
Transactions with Related Parties (Cont.)
e.
Terms of Transactions with Related Parties
Sales to related parties are conducted
at market prices. Outstanding trade receivables due from related parties the end of the year bears no
interest, and their settlement will
be in cash. For the years ended December 31, 2024, 2023 and 2022, the Company recorded no
allowance for doubtful accounts for trade receivable
due from related parties.
1.
Tuteur SACIFIA (“Tuteur”), a company registered in Argentina, was formerly controlled by Mr.
Ralf Hahn, the former Chairman of
the Company’s Board of Directors, and its currently under the control of the Hahn family. Mr. Ralf Hahn’s
son, Mr. Jonathan Hahn,
currently the President and a director of Tuteur, served as a director of the Company from March 2010 until November
2023.
The Company has a long-standing distribution
arrangement with Tuteur for distribution of GLASSIA and KAMRHO(D) in
Argentina and several other South American countries. The original
agreement was entered into in November 2001 and since was
amended, restated several times, including being replaced by a new distribution
agreement from May 2020, which was also amended
several times since.
Tuteur was considered a related party
until November 2023, and upon departure of Mr. Jonathan Hahn from the Company’s Board of
Director it is no longer treated as such.
2.
FIMI, the leading private equity firm in Israel, beneficially owns approximately 38% of the Company’s outstanding ordinary shares
and is a controlling shareholder of the Company, within the meaning of the Israeli Companies Law, 1999. Refer to Note 19 for
further detail.
The following Israeli entities: E&M
Computing Ltd., and SPIDER SOLUTIONS LTD, which are controlled by or affiliated with the
FIMI Funds, are currently engaged by the Company
for the provision of certain services relating to its continuous operations in non-
material amounts and at market prices.
Note 26: - Events Subsequent
to the Reporting Period
On March 5, 2025, the Company
announced that its Board of Directors has declared a special cash dividend of $0.20 (approximately NIS 0.72)
per share on the
Company’s common stock (totaling approximately $11,501 thousands). The special cash dividend will be payable on April 7,
2025, to shareholders of record at the close of business on March 17, 2025.
F-67
Exhibit 2.1
DESCRIPTION OF SECURITIES
The descriptions of the securities
contained herein summarize the material terms and provisions of the ordinary shares of Kamada Ltd., registered
under Section 12 of the
Securities Exchange Act of 1934.
General
Our authorized and registered
share capital is NIS 70,000,000 divided into 70,000,000 ordinary shares, nominal (par) value NIS 1.00 each.
The Nasdaq Global Select Market
Our ordinary shares are listed
on the Nasdaq Global Select Market and the Tel Aviv Stock Exchange under the symbol “KMDA”.
Memorandum and Articles of Association
The following description
of our memorandum of association and amended articles of association (the "Amended Articles") are summaries and
are qualified
in their entirety by reference to the full text of the Memorandum of Association and Articles of Association, filed as Exhibit 1.2 and
Exhibit 1.1
to our Annual Report, respectively.
Establishment and Purposes of the Company
We were incorporated under
the laws of the State of Israel on December 13, 1990 under the name Kamada Ltd. We are registered with the Israeli
Registrar of Companies
in Jerusalem. Our registration number is 51-152460-5. Our purpose as set forth in the Amended Articles is to engage in any lawful
business.
Ordinary Shares
Voting
Holders of our ordinary shares
have one vote per ordinary share on all matters submitted to a vote of shareholders at a shareholders’ meeting.
Shareholders may
vote at shareholder meetings either in person, by proxy or, with respect to certain resolutions, by a voting instrument.
Israeli law does not allow
public companies to adopt shareholder resolutions by means of written consent in lieu of a shareholder meeting.
Transfer of Shares
Fully paid ordinary shares
are issued in registered form and may be freely transferred under our articles of association unless the transfer is
restricted or prohibited
by another instrument, Israeli law or the rules of a stock exchange on which the shares are traded.
Election of Directors
Our ordinary shares do not
have cumulative voting rights for the election of directors. Rather, under our articles of association, directors (other
than external
directors, if any) are elected by the holders of a simple majority of our ordinary shares at a general shareholder meeting (excluding
abstentions). As a result, the holders of our ordinary shares that represent more than 50% of the voting power represented at a shareholder
meeting and
voting thereon (excluding abstentions) have the power to elect any or all of our directors whose positions are being filled
at that meeting (subject to the
special approval requirements under the Israeli Companies Law, 1999 (the “Companies Law”)
for the election of external directors, if any). In addition,
under our articles of association, vacancies on our board of directors (other
than external director vacancies), including vacancies resulting from there being
fewer than the maximum number of directors permitted
by our articles of association, may be filled by a vote of a simple majority of the directors then in
office, and such appointment shall
be valid until the next annual general meeting (or until such director ceases to serve in such capacity, if earlier).
Dividend and Liquidation Rights
We may declare a dividend to
be paid to the holders of our ordinary shares in proportion to their respective shareholdings and may fix the record date
for eligibility
and the time for payment, subject to the Companies Law. Under the Companies Law, dividend distributions are determined by the board of
directors and do not require the approval of the shareholders of a company unless the company’s articles of association provide
otherwise. The Amended
Articles do not require shareholder approval for a dividend distribution and provide that dividend distributions
may be determined by our board of
directors.
Pursuant to the Companies
Law, unless otherwise approved by a court, we may declare and pay dividends or make other “distributions,” including
share
repurchases, only out of the greater of our retained earnings or out of our earnings generated over the two years preceding the distribution
according
to the then last reviewed or audited financial statements (less the amount of previously distributed dividends, if not already
reduced from the earnings),
provided that the end of the period to which the financial statements relate is not more than six months prior
to the date of the distribution (referred to as the
”profit test”). If we do not meet the profit test, court approval is required
to distribute a dividend. In each case, we are only permitted to distribute a
dividend if our board of directors and, if applicable the
court, determines that there is no reasonable concern that the payment of the dividend will prevent
us from satisfying our existing and
foreseeable obligations as they become due (referred to as the “solvency test”).
Pursuant to regulations promulgated
under the Companies Law, in the case of Israeli companies dual listed on the TASE and certain non-Israeli
exchanges, including the Nasdaq,
or which have offered their shares to the public solely outside of Israel or are listed solely on a non-Israeli exchange, the
board of
directors may resolve to distribute a dividend by way of a share repurchase program if it does not meet the profit test without seeking
the approval
of the court, subject to the following: (i) the company meets the solvency test; and (ii) the company provided a notice to
certain creditors regarding its
intention to distribute a dividend by way of a share repurchase program without meeting the profit test
and no such creditor submits an objection within 30
days of the notice (otherwise, court approval would be required for such distribution
in accordance with the requirements of the Companies Law).
In the event of our liquidation,
after satisfaction of liabilities to creditors, our assets legally available for distribution will be distributed to the
holders of our
ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant
of
preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in
the future.
Shareholder Meetings
Under the Companies Law, we
are required to convene an annual general meeting of our shareholders at least once every calendar year and within
a period of not more
than 15 months following the preceding annual general meeting. In addition, the Companies Law provides that our board of directors
may
convene a special general meeting of our shareholders whenever it sees fit and is required to do so upon the written request of (i) two
directors or one
quarter of the serving members of our board of directors, or (ii) one or more holders of 5% or more of our outstanding
share capital and 1% of our voting
power, or the holder or holders of 5% or more of our voting power.
Subject to the provisions
of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at
general meetings are
the shareholders of record on a date to be decided by the board of directors, which in the case of an Israeli company whose shares are
dual listed on the TASE and on certain exchanges outside of Israel, such as the Nasdaq, may be between four and 60 days prior to the date
of the meeting.
The Companies Law requires that resolutions regarding the following matters (among others) be approved by our shareholders
at a general meeting:
amendments to our articles of association; appointment, terms of service and termination of service of our auditors;
election of external directors; approval
of certain related party transactions; increases or reductions of our authorized share capital;
mergers; dissolution of the company by a court, voluntary
dissolution or voluntary dissolution in an expedited procedure, and the exercise
of our board of director’s powers by a general meeting, if our board of
directors is unable to exercise its powers and the exercise
of any of its powers is essential for our proper management.
2
The chairman of our board
of directors presides over our general meetings. However, if at any general meeting the chairman is not present within
15 minutes after
the appointed time or is unwilling to act as chairman of such meeting, then the shareholders present will choose any other person present
to be chairman of the meeting.
Israeli law requires that
a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the
meeting and
if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with
office
holders or interested or related parties, an approval of a merger or the approval of the compensation policy, notice must be provided
at least 35 days prior to
the meeting.
Quorum
Pursuant to our Amended Articles,
the quorum required for a meeting of our shareholders is the presence of two or more shareholders present in
person, by proxy or by a
voting instrument, who hold at least 25% of our voting power. A meeting adjourned for lack of a quorum is generally adjourned to
one week
thereafter at the same time and place, or to such other day, time and place, as our board of directors may indicate in the notice of the
meeting to
the shareholders. Pursuant to our Amended Articles, at the reconvened meeting, the meeting will take place with any number
of participants present.
Resolutions
Under the Companies Law, unless
otherwise provided in our Amended Articles or applicable law, all resolutions of the shareholders require a
simple majority of the voting
rights represented at the meeting, in person, by proxy or, with respect to certain resolutions, by a voting instrument, and
voting on
the resolution (excluding abstentions). Under Israeli law, a resolution for the voluntary winding up of the company requires the approval
by the
holders of 75% of the voting rights represented at the meeting, in person or by proxy and voting on the resolution (excluding abstentions).
Under our
Amended Articles, a merger shall require the approval of a special majority of the shareholders, as described below under “Merger.”
Access to Corporate Records
Under the Companies Law, all
shareholders generally have the right to review minutes of our general meetings, our shareholder register and
register of significant
shareholders (as defined in the Companies Law), our Amended Articles, our financial statements and any document we are required
by law
to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, any shareholder who specifies the
purpose of its
request may request to review any document in our possession that relates to: (i) any action or transaction with a related
party which requires shareholder
approval under the Companies Law; or (ii) the approval, by the board of directors, of an action in which
an office holder has a personal interest. We may
deny a request to review a document if we determine that the request was not made in
good faith, that the document contains a commercial or technological
secret or that the document’s disclosure may otherwise impair
our interests.
Acquisitions Under Israeli Law
Full Tender Offer
A person wishing to acquire
shares of an Israeli public company and who would, as a result, hold over 90% of the target company’s issued and
outstanding share
capital (or over 90% of the issued and outstanding share capital of a certain class of shares) is required by the Companies Law to make
a
tender offer to all of the company’s shareholders (or all of the shareholders who hold shares of the same class) for the purchase
of all of the issued and
outstanding shares of the company or of a certain class. If the shareholders who do not respond to or accept
the offer hold less than 5% of the issued and
outstanding share capital of the company or of the applicable class of the shares, and more
than half of the shareholders who do not have a personal interest
in the offer accept the offer, all of the shares that the acquirer offered
to purchase will be transferred to the acquirer by operation of law. However, a tender
offer will also be accepted if the shareholders
who do not accept it hold less than 2% of the issued and outstanding share capital of the company or of the
applicable class of shares.
3
Upon a successful completion
of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder
accepted the tender offer
or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the
tender
offer was for less than fair value and that the fair value should be paid as determined by the court. However, under certain conditions,
the offeror
may include in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli
court as described above.
If (a) the shareholders who
did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company
or of the applicable
class or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in
the
acceptance of the tender offer, or (b) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding
share capital of the
company (or of the applicable class), the acquirer may not acquire shares of the company that will increase its holdings
to more than 90% of the company’s
issued and outstanding share capital or of the applicable class from shareholders who accepted
the tender offer.
Special Tender Offer
The Companies Law provides
that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a
result of the acquisition
the purchaser would become a holder of 25% or more of the voting rights in the company. This rule does not apply if there is
already another
holder of 25% or more of the voting rights in the company.
Similarly, the Companies Law
provides that an acquisition of shares in a public company must be made by means of a special tender offer if as a
result of the acquisition
the purchaser would become a holder of more than 45% of the voting rights in the company, provided there is no other shareholder
of the
company who holds more than 45% of the voting rights in the company.
These requirements do not
apply if the acquisition (i) occurs in the context of a private placement, that was approved by the company’s
shareholders and whose
purpose is to give the acquirer at least 25% of the voting rights in the company if there is no person who holds 25% or more of the
voting
rights in the company, or as a private placement whose purpose is to give the acquirer 45% of the voting rights in the company, if there
is no person
who holds 45% of the voting rights in the company; (ii) was from a shareholder holding 25% or more of the voting rights in
the company and resulted in
the acquirer becoming a holder of 25% or more of the voting rights in the company; or (iii) was from a holder
of more than 45% of the voting rights in the
company and resulted in the acquirer becoming a holder of more than 45% of the voting rights
in the company.
A special tender offer must
be extended to all shareholders of a company. The special tender offer may be consummated only if (i) at least 5% of
the voting power
attached to the company’s outstanding shares will be acquired by the offeror, and (ii) the number of shares tendered in the offer
exceeds
the number of shares whose holders objected to the offer (excluding controlling shareholders, holders of 25% or more of the voting
rights in the company
and any person having a personal interest in the acceptance of the tender offer).
In the event that a special
tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer or
it may
abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention.
An office holder in a target
company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure
of an existing
or foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders
for
damages resulting from his acts, unless such office holder acted in good faith and had reasonable grounds to believe he or she was
acting for the benefit of
the company. However, office holders of the target company may negotiate with the potential purchaser in order
to improve the terms of the special tender
offer, and may further negotiate with third parties in order to obtain a competing offer.
4
If a special tender offer
is accepted, then shareholders who did not respond to the special offer or had objected to the special tender offer may
accept the offer
within four days of the last day set for the acceptance of the offer.
In the event that a special
tender offer is accepted, then the purchaser or any person or entity controlling it and any corporation controlled by them
must refrain
from making a subsequent tender offer for the purchase of shares of the target company and may not effect a merger with the target company
for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or
merger in the initial
special tender offer.
Merger
The Companies Law permits
merger transactions if approved by each party’s board of directors and, unless certain requirements described under
the Companies
Law are met, a majority of each party’s shareholders. Under our Amended Articles, a merger shall require the approval of 66.6% of
the
voting rights represented at a meeting of our shareholders and voting on the matter, in person or by proxy, and any amendment to such
provision shall
require the approval of 60% of the voting rights represented at a meeting of our shareholders and voting on the matter,
in person or by proxy.
The board of directors of
a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there
exists a reasonable
concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors,
taking into account the financial condition of the merging companies. If the board of directors has determined that such a concern exists,
it may not approve
a proposed merger. Following the approval of the board of directors of each of the merging companies, the boards of
directors must jointly prepare a
merger proposal for submission to the Israeli Registrar of Companies.
For purposes of the shareholder
vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares voting at
the shareholders meeting
(excluding abstentions) that are held by parties other than the other party to the merger, any person who holds 25% or more of the
outstanding
shares or the right to appoint 25% or more of the directors of the other party, or any one on their behalf including their relatives or
corporations
controlled by any of them, vote against the merger.
In addition, if the non-surviving
entity of the merger has more than one class of shares, the merger must be approved by each class of
shareholders.
If the transaction would have
been approved but for the separate approval of each class of shares or the exclusion of the votes of certain
shareholders as provided
above, a court may still rule that the company has approved the merger upon the request of holders of at least 25% of the voting
rights
of a company, if the court holds that the merger is fair and reasonable, taking into account the appraisal of the merging companies’
value and the
consideration offered to the shareholders.
Under the Companies Law, a
merging company must send a copy of the proposed merger plan to its secured creditors no later than three days after
the date on which
the merger proposal was submitted to the Israeli Companies Registrar. Unsecured creditors are entitled to receive notice of the merger,
as
provided by the regulations promulgated under the Companies Law. Upon the request of a creditor of a merging company, the court may
delay or prevent
the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company
will be unable to satisfy the
obligations of the target company. The court may also give instructions in order to secure the rights of
creditors.
In addition, a merger may
not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger was filed
with the Israeli
Registrar of Companies and 30 days from the date that shareholder approval of both merging companies was obtained.
5
Anti-Takeover Measures under Israeli Law
The Companies Law allows us
to create and issue shares having rights different from those attached to our ordinary shares, including shares
providing certain preferred
or additional rights to voting, distributions or other matters and shares having preemptive rights. We do not have any authorized
or issued
shares other than ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of
shares,
depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders
from realizing a
potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require
an amendment to our Amended
Articles of association which requires the prior approval of a majority of our shares represented and voting
at a general meeting. Shareholders voting at
such a meeting will be subject to the restrictions under the Companies Law described above
in “— Ordinary Shares — Voting.” Pursuant to the Israeli
Securities Law, 5728-1968, a company whose shares are
traded on the TASE may not have more than one class of shares except for preferred shares which
may have a dividend preference but may
not have any voting rights.
Modification of Class Rights
The Companies Law and our
Amended Articles provide that the rights of a particular class of shares may not be modified without the affirmative
vote at a separate
meeting of such class of a majority of shares actually participating in such class meeting.
6
Exhibit 4.41
-Confidential-
FIFTH AMENDMENT TO SUPPLY AND DISTRIBUTION
AGREEMENT
This fifth amendment (the “Fifth Amendment”)
to the Supply and Distribution Agreement (as defined below) is hereby entered into by and between
Kamada Ltd., a corporation organized
and existing under the laws of Israel, with its principal office in 2 Holzman Street, Weizmann Science Park, Rehovot
7670402, Israel (“Kamada”)
and Kedrion Biopharma Inc., with its principal office at 400 Kelby Street, 11th Floor, Fort Lee, New Jersey 07024, United
States of America
(“KBI”) as of January 1, 2025 (the “Fifth Amendment Effective Date”). Each of Kamada and KBI may
be referred to individually as a
“Party” and collectively as the “Parties”. All capitalized terms
used but not otherwise defined herein shall have the meanings set forth in the Supply and
Distribution Agreement.
Whereas:
Kamada and Kedrion S.pA., a company incorporated under the laws of Italy with its registered office at
55051 Castelvecchio Pascoli, Barga
(LU) (“Kedrion Italy”) entered into a Supply and Distribution Agreement dated July
18, 2011, with respect to the Territory of the United
States of America (the “Supply and Distribution Agreement” or
the “Agreement”), which was assigned by Kedrion Italy to KBI on March
8, 2017, and which assignment took effect retroactively
as of July 23, 2016; and which was amended as of October 15th, 2016 (the “First
Amendment”) and as of October
11, 2018 (the “Second Amendment”) and as of June 3, 2019 (the “Third Amendment”) and as of June
30,
2022 (the “Fourth Amendment”). The Agreement, together with the First Amendment, the Second Amendment, the Third
Amendment, and
the Fourth Amendment, shall collectively be referred to as the “Supply and Distribution Agreement”.
Whereas:
On December 4th, 2023, the Parties entered into a Binding Memorandum of Understanding (the
“MOU”), which sets forth the understandings
and commitments of the Parties that were meant to serve as the basis for
this Fifth Amendment; and
Whereas:
The Parties seek to amend and supplement the Supply and Distribution Agreement, based on the understandings
and commitments of the
Parties with respect to such matters, as set forth in the MOU.
NOW THEREFORE, in consideration of the
mutual covenants, undertakings and conditions set forth below, the receipt and sufficiency of which are
hereby acknowledged, the Parties
hereby agree as follows:
1.
General
1.1
The Preamble is an integral part hereof.
1.2
Capitalized words not otherwise defined shall have the meanings ascribed to them in the Supply and Distribution
Agreement.
1.3
This Fifth Amendment shall take effect as of the Fifth Amendment Effective Date.
1.4
For the sake of good order and clarity, where previous provisions are amended or supplemented hereunder,
the original provisions shall be set
forth below, followed by the amended provisions in full which will replace the original provisions
in their entirety. Where possible, changes in
drafting will be italicized and underlined, while deletions will not be visibly struck out,
but rather just removed. Such italicized and
underlined provisions are for the purpose of organization and transparency only and shall
not have any effect on the meaning of the provisions
as amended.
2.
Amendment of the Supply and Distribution Agreement
The Parties agree as follows:
2.1
The definition of “Additional Territories” as set forth in Section 2.2 of the Supply
and Distribution Agreement, as follows:
“2.2. “Additional Territories”
- Any territories for which Kamada shall appoint Kedrion as exclusive distributor of the Product, in addition
to the Territory.
shall be replaced in its entirety by
the following:
“2.2 “Additional Territories”
[*****] for which Kamada shall appoint KBI or one of its affiliates as exclusive distributor of the Product, in
addition
to the Territory.”
2.2
The definition of “Product” as set forth in Section 2.35 of the Supply and Distribution
Agreement, as follows:
“2.35
“Product” - means KamRAB as approved by the FDA for distribution in the Territory for use for the permitted indications
pursuant to
the Biologics License.”
shall be replaced in its entirety by
the following:
“2.35 “Product”
- means KamRAB as approved by the FDA for distribution in the United States for use for the permitted indications
pursuant
to the Biologics License, and launched by the Parties in the United States under the trademark KEDRAB.”
2.3
The definition of “Regulatory Filings” as set forth in Section 2.38 of the Supply and
Distribution Agreement, as follows:
“2.38
“Regulatory Filings” - means any document or report required to be filed with respect to the FDA License Approval and
the Biologics
License under the Act and the associated regulations in Title 21 of the CFR, including, without limitation any supplement
to the approval
BLA and post-marketing report.”
shall be replaced in its entirety by
the following:
“2.38
“Regulatory Filings” - means any document or report required to be filed with respect to the FDA License Approval and
the Biologics
License under the Act and the associated regulations in Title 21 of the CFR, including, without limitation any supplement
to the approval
BLA and post-marketing report; as well as any document
or report required to be filed with respect to Market Approvals pursuant to Section
3.1 below.”
2
2.4
The definition of “Market Share” as set forth in Section 2.30 of the Supply and Distribution
Agreement, as follows:
“2.30
“Market Share” - as defined in Section 5.14.1 below.”
shall be deleted in its entirety and
the provisions of 5.14.1 of the Supply and Distribution Agreement shall be amended as set for herein below
in this Fifth Amended so that
the term “Market Share” shall no longer be defined in the amended Section 5.14.1.
2.5
The definition of “Territory” as set forth in Section 2.41 of the Supply and Distribution
Agreement, as follows:
“2.41
“Territory” means the United States of America.”
shall be replaced in its entirety by
the following:
“2.41 “Territory”
means the United States of America, and any country in the Additional Territories for which Market Approvals were
obtained, subject
to Section 3.1 below.”
2.6
Section 3.1 of the Supply and Distribution Agreement, as follows:
“3.1 Kedrion Right. Kamada
owns certain Technology and facilities to manufacture the Product. Kamada agrees to use the Technology to
manufacture the Product to be
acquired by Kedrion subject to the terms and conditions set forth in this Agreement. Effective upon the
approval of the BLA, and unless
Kedrion has failed to comply with it minimum order obligations under Section 5.14 below after notice and
the expiration of any applicable
cure periods, Kedrion shall have, and Kamada shall be deemed to have granted to Kedrion, the exclusive right
(exclusive even with regard
to Kamada and its Affiliates) to distribute, market, offer for sale, sell, import and promote the Product in the
Territory during the
Term, under the Kamada label and brand name or a Kedrion label and brand name (in which event Kamada shall be
indicated as the manufacturer
of the Product) it being understood and agreed that the decision of label and brand name shall be made by
Kedrion in its sole and absolute
discretion.
The Parties will also negotiate in
good faith the granting to Kedrion of distribution right in the Additional Territories.”
shall be deleted and replaced by the
following:
“3.1 KBI
Right. Kamada owns certain Technology and facilities to manufacture the Product. Kamada agrees to use the Technology to
manufacture
the Product to be acquired by KBI or one of its affiliates subject to the terms and conditions set forth in this Agreement.
Effective
upon the approval of the BLA, and unless KBI or one of its affiliates has failed to comply with its minimum order
obligations under Section
5.14 below after notice and the expiration of any applicable cure periods, KBI or one of its affiliates
shall have, and Kamada shall be deemed
to have granted to KBI or one of its affiliates, the exclusive right (exclusive even
with regard to Kamada and its Affiliates) to distribute,
market, offer for sale, sell, import and promote the Product in the Territory
during the Term, under the Kamada label and brand name or KBI
or one of its affiliates label and brand name (in which event
Kamada shall be indicated as the manufacturer of the Product) it being
understood and agreed that the decision of label and brand name
shall be discussed and agreed between Kamada and KBI in advance. The
above shall apply, mutatis mutandis, to each
country of the Additional Territories, to the extent that the applicable market approvals and
required licenses have been obtained for
the import, distribution, marketing and sale of the Product (the “Market Approvals”) in each
country of the Additional
Territories. Kamada and KBI or one of its affiliates shall prepare and submit applications for Market Approvals in
accordance with a Regulatory
Submissions Plan to be negotiated in good faith by the Parties and set forth in a separate agreement, as well as
the commercial terms
related to import, distribution, marketing and sale of the Product in the Additional Territories (collectively, the
“Commercial
Terms”). Subject to reaching an agreement on the Commercial Terms, and upon the obtainment of applicable Market
Approvals for
any country included in the Additional Territories, such country shall be deemed to be a part of the Territory for the purpose of
this
Agreement, except with respect to BLA submissions and clinical trials pursuant to Section 3.2 and 3.4 below.
The Parties will also negotiate in
good faith the granting to KBI of distribution right in each of the Additional Territories.”
3
2.7
Section 3.2.5 of the Supply and Distribution Agreement, as follows:
“3.2.5
Kamada shall use commercially reasonable efforts to enter into a Plasma Supply Agreement and a Quality/cGMP Agreement
(collectively, the
“Plasma Supply Agreements”) with[*****]. Such Plasma
Supply Agreements shall be substantially in the forms currently
being negotiated by [*****] and
Kamada. During the Term, Kamada shall not enter into any other plasma supply agreements, without
offering [*****] the
right to provide equivalent Plasma under the same terms and conditions, as proposed by the other Plasma supplier.”
shall be deleted in its entirety.
2.8
Section 3.4.15 of the Supply and Distribution Agreement, as follows:
“3.4.15
without the prior written consent of Kamada, refrain
from, directly or indirectly, whether as principal, partner, or as agent together
with, or for any person, manufacture, use, test, promote,
market, distribute or sell in the Territory, or the Additional Territories, if applicable,
or otherwise deal in any product in the Territory,
or the Additional Territories, if applicable, which is similar to and/or competes with the
Product, during the term of this Agreement.”
shall be replaced in its entirety by
the following provisions:
“3.4.15 without the prior written
consent of Kamada, refrain from, directly or indirectly, whether as principal, partner, or as agent, together
with, or for any person,
manufacture, use, test, promote, market, distribute or sell, or otherwise deal in any product, or develop or carry out or
participate
in any development activities that may result in a product, which is similar to and/or competes with the Product, during the Term
(including any Extended Term), provided however that nothing in this Supply and Distribution Agreement shall prohibit any of KBI and
Kedrion
Italy’s affiliated entities from distributing HRIG products approved prior to January 1st, 2024 in the Territory, in
order to comply
with any applicable laws or contractual obligations, which were made prior to January 1st, 2024.”
4
2.9
Section 4.2 of the Supply and Distribution Agreement, as follows:
“4.2 Ownership.
Kamada shall be the exclusive owner of the BLA and, if the BLA is approved by the FDA, Kamada shall be the exclusive
owner of the Biologics
License. Kamada shall also exclusively own the Product IND, all Regulatory Filings pertaining to the Product and all
data pertaining to
Kamada’s Technology and the Kamada Marks. Kedrion shall be the exclusive owner of all data, studies, reports etc.
associated with the
Clinical Trials conducted by Kedrion or by any third party on its behalf under this Agreement in relation to the Product
(hereinafter
the “Clinical Results”), provided, however, that in the event that Kedrion fails to fully comply with (a) its obligations
to finance
the Clinical Trials or its share in the financing of the phase IV Clinical Trial or post marketing studies under Section 3.4.1,
after thirty (30)
days’ prior written notice and opportunity to cure or (b) or timely cure an Order Shortfall under Section 5.14 below,
then Kamada shall, in
addition to all remedies available at law or in equity, automatically become the exclusive owner of the Clinical
Result and all rights related
thereto, provided, however, that Kamada is not in material default in the performance of t obligations hereunder
or under the Plasma Supply
Agreements, it being understood and agreed that once Kamada cures such material default, the Clinical Results
shall be deemed transferred to
Kamada. Kedrion shall grant Kamada a perpetual license, at no cost to Kamada, terminable only upon material
default by Kamada in the
performance of its obligations under this Agreement or the Plasma Supply Agreements beyond any applicable notice
and cure period, to use
the Clinical Result for the purpose of the BLA and Regulatory Filings and other regulatory submissions worldwide
for the Product,
promotional materials, scientific publications, and in connection with any joint analysis and any further clinical and/or
research and
development activity to be conducted by Kamada. Kedrion shall also license out to Kamada, at no cost to Kamada, the Clinical
Results for
purposes of updating existing Product registrations which Kamada holds worldwide and for new registrations which Kamada may
apply for,
simultaneously with or following the BLA approval of the Product in new territories. Unless Kamada becomes the owner of the
Clinical
Results as described above, Kamada may not use the Clinical Results for any other purpose unless granted in writing by Kedrion.”
Shall be replaced in its entirety by
the following provisions:
“4.2 Ownership.
Kamada is the exclusive owner of the BLA and of the Biologics License. Kamada shall also be the exclusive owner of
all
Market Approvals (to the extent possible and if any Market Approval is not registered in Kamada’s name, then Kamada shall have
the
contractual right to have the Market Approval transferred to Kamada or any designee of Kamada upon termination or expiration of this
Agreement). Kamada shall also exclusively own the Product IND, all Regulatory Filings pertaining to the Product and all data pertaining
to
Kamada’s Technology and the Kamada Marks. KBI shall be the exclusive owner of all data, studies, reports etc. associated
with the Clinical
Trials conducted by KBI or by any third party on its behalf under this Agreement in relation to the Product
(hereinafter the “Clinical
Results”), provided, however, that with respect to the U.S. market, in the event that
KBI fails to fully comply with (a) its obligations to
finance the Clinical Trials or its share in the financing of the phase
IV Clinical Trial or post marketing studies under Section 3.4.1, after thirty
(30) days’ prior written notice and opportunity to cure
or (b) timely cure an Order Shortfall under Section 5.14 below, then Kamada shall, in
addition to all remedies available at law or in
equity, automatically become the exclusive owner of the Clinical Result and all rights related
thereto, provided, however, that Kamada
is not in material default in the performance of its obligations hereunder, it being understood and
agreed that once Kamada cures such
material default, the Clinical Results shall be deemed transferred to Kamada. KBI shall grant Kamada a
perpetual license,
at no cost to Kamada, terminable only upon material default by Kamada in the performance of the obligations under this
Agreement beyond
any applicable notice and cure period, to use the Clinical Result for the purpose of the BLA and Regulatory Filings and
other regulatory
submissions worldwide for the Product, promotional materials, scientific publications, and in connection with any joint
analysis and any
further clinical and/or research and development activity to be conducted by Kamada. KBI shall also license out to Kamada,
at no cost to Kamada, the Clinical Results for purposes of updating existing Product registrations, which Kamada holds worldwide and for
new registrations which Kamada may apply for, simultaneously with or following the BLA approval of the Product in new territories. Unless
Kamada becomes the owner of the Clinical Results as described above, Kamada may not use the Clinical Results for any other purpose unless
granted in writing by KBI.”
5
2.10
Section 5.2 of the Supply and Distribution Agreement, as follows:
“5.2. Processing. Kamada,
as the owner of the Technology for the Product and any improvements thereof, shall be responsible for Processing
the Product, whether
by itself or by third parties, subsidiaries or Affiliates, in accordance with the Manufacturing Specifications. Said
Processing shall
include, without limitation, all Product labeling and other package inserts and
materials required by the FDA. Kamada shall
ensure that all services, facilities and Raw Materials used in connection with such manufacture
comply, in all material respects, with the
applicable cGMPs in effect.”
shall be replaced in its entirety by
the following provisions:
“5.2. Processing. Kamada,
as the owner of the Technology for the Product and any improvements thereof, shall be responsible for Processing
the Product, whether
by itself or by third parties, subsidiaries or Affiliates, in accordance with the Manufacturing Specifications. Said
Processing shall
include, without limitation, all Product labeling and other package inserts and
materials required by the FDA and any Market
Approvals. Kamada shall ensure that all services, facilities and Raw Materials
used in connection with such manufacture comply, in all
material respects, with the applicable cGMPs in effect.”
2.11
Section 5.3 of the Supply and Distribution Agreement, as follows:
“5.3. Change in Processing.
Kamada shall update Kedrion reasonably in advance on any major planned changes to the Product’s
manufacturing process. A change is defined
as any variation that: (a) may materially affect the quality, purity, identity or strength of the Raw
Materials or the Product, (b) would
necessarily result in changing, altering or modifying the Product Specifications, Handling Specifications,
Testing Methods (defined below),
sampling procedures, validation procedures, or (c) may materially and adversely affect the quantity,
availability or timing of delivery
of Product. In the event that such a change is required under applicable law, regulation or by any competent
regulatory authority, Kamada
shall solely bear any and all costs and expenses associated with implementing said change, including, but not
limited to, manufacturing
and regulatory costs. Kedrion shall bear any costs of performing the studies necessary to meet any and all
requirements from the FDA (including,
without limitation, the requirements of 21 CFR §§ 600.14 and 601.12) needed to approve such
change, including the costs of any
FDA required clinical trials necessary to implement said change. The costs of the Product required for such
clinical trials shall be shared
equally between the Parties. Within [*****] days from receiving Kamada’s first notice of any such planned
change, Kedrion may place a
purchase order for up to the aggregate annual quantity of the Product set forth in the then applicable [*****]
purchase forecast, and
Kamada shall make its commercially reasonable efforts to supply such quantity according to a timetable that shall be
agreed by the Parties
and if they are unable to agree, the matter shall be resolved in accordance with the provisions of Section 19 hereof.”
shall be replaced in its entirety by
the following provisions:
“5.3. Change in Processing.
Kamada shall update KBI reasonably in advance on any major planned changes to the Product’s manufacturing
process. A change
is defined as any variation that: (a) may materially affect the quality, purity, identity or strength of the Raw Materials or the
Product,
(b) would necessarily result in changing, altering or modifying the Product Specifications, Handling Specifications, Testing Methods
(defined
below), sampling procedures, validation procedures, or (c) may materially and adversely affect the quantity, availability or timing of
delivery of Product. In the event that such a change is required under applicable law, regulation or by any competent regulatory authority,
Kamada shall solely bear any and all costs and expenses associated with implementing said change, including, but not limited to,
manufacturing
and regulatory costs. KBI shall bear any costs of performing the studies necessary to meet any and all requirements from
the
FDA (including, without limitation, the requirements of 21 CFR §§ 600.14 and 601.12) or Market Approvals needed
to approve such change,
including the costs of any FDA required clinical trials necessary to implement said change. The costs of the Product
required for such clinical
trials shall be shared equally between the Parties. Within [*****] days from receiving Kamada’s first notice
of any such planned change, KBI
may place a purchase order for up to the aggregate annual quantity of the Product set forth
in the then [*****] purchase forecast, and Kamada
shall make its commercially reasonable efforts to supply such quantity according to
a timetable that shall be agreed by the Parties and if they
are unable to agree, the matter shall be resolved in accordance with the provisions
of Section 19 hereof.”
6
2.12
Section 5.4 of the Supply and Distribution Agreement, as follows:
“5.4. Forecasts. During the
Term of this Agreement, [*****] Kedrion shall provide Kamada with a non-binding good faith forecast for the
following Calendar Year, broken
down into calendar quarters, for the quantity of the Product that Kedrion proposes to acquire from Kamada.
During the Term of this Agreement,
Kamada shall, [*****] of each Calendar Year, provide Kedrion with a non-binding good faith forecast for
the following Calendar Year, broken
down into calendar quarters, for the quantity of the Product that Kamada anticipates being able to
produce for Kedrion. For the Calendar
Year during which the BLA is approved, Kedrion and Kamada shall determine, within [*****] of such
approval, a good faith estimation of
the Product to be supplied to Kedrion during such partial Calendar Year, and if the BLA is procured
[*****] provide the respective forecasts
provided for above.”
shall be replaced in its entirety by
the following:
“5.4. Forecasts. During the
Term of this Agreement, [*****], KBI shall provide Kamada with a [*****] market and supply non-binding
forecast,
broken down into calendar quarters, for the quantity of the Product that KBI proposes to acquire from Kamada broken down to 2ml
and 10ml
vial presentations. Without derogating from KBI’s Minimum Purchase Commitment, throughout the Term and Extended Term
thereafter,
KBI will provide rolling [*****] forecasts, broken down to 2ml and 10ml vial presentations, to be updated and submitted
to
Kamada on a [*****] basis and no later than [*****], to be confirmed by Kamada in order to coordinate the
Product shipments. KBI
undertakes to maintain sufficient stock levels of the Product at all times to meet its sales forecast and market
demand. The first [*****]
forecast shall be binding.”
2.13
Section 5.6 of the Supply and Distribution Agreement, as follows:
“5.6. Delivery. Kamada shall
deliver, or cause to be delivered, the quantity of the Product specified in an approved purchase order to a
specific constant location
designated by Kedrion within the Territory, as shall be mutually agreed in advance by the Parties from time to time
(the “Kedrion’s
Facility”) and if they are unable to agree the matter will be resolved pursuant to Article 19. [*****] shall prepay shipping
and insurance (the “Shipping Costs”) for all deliveries of the Product to Kedrion’s Facility. Kedrion shall assist Kamada,
as reasonably
requested by Kamada, in order to minimize the number of shipments and as a consequence, the applicable Shipping Costs.”
shall be replaced in its entirety by
the following provisions:
“5.6 Delivery.
[*****] shall deliver, or cause to be delivered, the quantity of the Product specified in an approved purchase order [*****]
(Incoterms
2020). [*****] shall bear all shipping and insurance costs for all deliveries of the Product to KBI’s Facility, and [*****]
for the
shipping and insurance costs (“Shipping Costs”) up to [*****] USD on a yearly basis commencing on [*****],
in the form of a wire transfer
to be made within [*****] of the applicable invoice. Invoice for the Shipping Costs of each quarter
will be issued by Kamada on the basis of
documented costs on the [*****]. KBI shall assist Kamada, as reasonably requested by Kamada,
in order to minimize the number of
shipments and as a consequence, the applicable Shipping Costs. If and when the Shipping Costs
exceed [*****] the Parties shall conduct
good-faith discussions to determine a new reimbursable Shipping Costs amount.
2.14
Section 5.7 of the Supply and Distribution Agreement, as follows:
“5.7. Title. Title and risk
of loss to each shipment of the Product to be delivered to Kedrion shall remain in Kamada until delivery of the
Product to Kedrion’s Facility
as provided in Section 5.6. Thereafter, title and risk of loss to the Products in such shipment shall transfer to
Kedrion, subject to
the full and timely payment by Kedrion for the relevant shipment and except as otherwise hereinafter expressly set forth.”
shall be replaced in its entirety by
the following provisions:
“5.7. Title. Title
to each shipment of the Product shall transfer to KBI subject to the full and timely payment by KBI for the relevant shipment.
7
2.15
Section 5.14.1 of the Supply and Distribution Agreement, as follows:
“5.14.1. During
the [*****] Fiscal Year period (the “Minimum Order Period”) beginning [*****] business days from the date that Kamada
notifies Kedrion that Kamada has printed FDA approved packaging on a batch approved by CBER and is able to ship the Product, Kedrion
shall
be obligated to order from Kamada for each Fiscal Year during the Minimum Order Period, an amount of the Product which represent at
least
[*****] (the “Market Share”) of the US anti-rabies immunoglobulin market (the “Market”) for such Fiscal
Year (the “Minimum
Amount”). Should Kedrion exercise its option to extend the original Term, as provided further to the
provisions of Section 13.1, then the
Market Share for the first Fiscal Year of the Extended Term, shall be changed to [*****] and for
the second Fiscal Year of the Extended Term,
shall be changed to [*****] and the Minimum Amount for each such Fiscal Year shall be calculated
using the foregoing Market Share. It is
understood and agreed that during, or prior to, each Fiscal Year, Kamada shall place purchase
orders for Plasma with [*****] in such amounts
as may be required to produce Product units representing not less than the applicable Market
Share for such [*****]. The Market Share shall
be determined by reference to the publications of the Market Research Bureau (“MRB”)
or such other independent third party acceptable to
both Parties. If the MRB no longer publishes data regarding the Market, the Parties
shall select another independent party for such purpose
and if they are unable to agree in writing, as to the person or entity to replace
MRS within [*****] following first raising the subject, the
determination will be made in accordance with the provisions of Section 19
hereof.”
shall be replaced in its entirety by
the following provisions:
“5.14.1.(a) For the fiscal
years 2024-2027 KBI shall be obligated to acquire from Kamada (unless supply interruptions render Kamada
unable to supply) or pay (“take
or pay”) the equivalent amount in respect of the following annual Minimum Purchase Commitments:
(i)
Year 2024 = [*****]
(ii)
Year 2025 = [*****]
(iii)
Year 2026 = [*****]
(iv)
Year 2027 = [*****]
5.14.1.(b) The distribution of the
above quantities between the 2ml and 10ml vial presentations and the supply schedule throughout the year
will be discussed and agreed
between the Parties, as part of the on-going supply chain mechanism pursuant to Section 5.4 above [*as
amended in Section 2.12 of this
Fifth Amendment].
8
5.14.1.(c) Kamada will have the
right, in [*****] the supply of up to [*****] (in other words, [*****] supply of up to an [*****] provided
that any such [*****] quantity will not affect KBI’s ability to meet its sales requirements. However, in no event will KBI’s
total Minimum
Purchase Commitment [*****], unless otherwise agreed by the Parties in writing.
5.14.1.(d) In the event Kamada [*****]
under this clause, the payment terms of such [*****] will be amended in such a way that the payment
due from [*****].
Example, for the avoidance of doubt: If Kamada is supposed to [*****], but Kamada exercises its right to [*****], the
payment
for such quantity will be [*****].
5.14.1.(e) Minimum Purchase Commitment
per year for 2028 onwards shall be the [*****]. The size of the U.S. market shall be determined
by reference to publications of
the Market Research Bureau or such other independent third party acceptable to both Parties. KBI shall be
obligated to acquire from Kamada
(unless supply interruptions render Kamada unable to supply) or pay (“take or pay”) the equivalent
amount in respect of the
annual Minimum Purchase Commitments each year.
For the avoidance of doubt –
KBI’s noncompliance with its Minimum Purchase Commitment (during the entire Term, including the Extended
Term, if applicable) shall
be a material breach of the terms of the Supply and Distribution Agreement.
2.16
Section 5.14.2 of the Supply and Distribution, as follows:
“5.14.2 Should Kedrion, during
any given Fiscal Year occurring during the Minimum Order Period and, if applicable, during the Extended
Term, fail to order an amount
of Product which is equal to or exceeds the Minimum Amount for such Fiscal Year (an “Order Shortfall”),
then Kedrion
shall be allowed to cure such Order Shortfall by either:
(a) ordering from Kamada, in the following
Fiscal Year, an amount of the Product equal to the Order Shortfall (it being understood and agreed
that such order shall not change the
obligation of Kedrion to order the Minimum Amount for such following Fiscal Year), subject to
Kamada’s commercially reasonable efforts
to manufacture units of the Product in excess of the Minimum Amount for such following Fiscal
Year (it being understood and agreed that
the manufacture of Product units to meet the Order Shortfall shall take reasonable priority over the
manufacture of the Product units
for customers outside of the Territory), or (b) paying to Kamada within sixty (60) days after the expiration of
the Fiscal Year in which
the Order Shortfall occurred (a “Shortfall Year”), an amount equal to the amount obtained by multiplying the
difference
between the number of Product units actually ordered by Kedrion for such Shortfall Year and the number of Product units
representing the
Minimum Amount for such Shortfall Year by fifty percent (50%) of the Purchase Price of the Product at the end of the
Shortfall Year. If
Kedrion fails to cure an Order Shortfall in accordance with the above provisions within one Fiscal Year of the expiration of
the Shortfall
Year during which such Order Shortfall occurs, then Kedrion shall (x) lose the exclusivity rights granted to it under Section 3.1
above
and (y) immediately transfer, and be deemed to have transferred the Clinical Results and all rights related thereto to Kamada provided,
however, that Kamada is not in material breach of its obligations hereunder and has failed to cure such breach within sixty (60) days
following receipt of a written notice from Kamada. Without derogating from the foregoing, if Kedrion fails to meet the Minimum Amount
in
any Fiscal Year and does not make up for the Order Shortfall during the subsequent Fiscal Year as provided above, such failure shall
be
deemed a material breach of this Agreement by Kedrion and will allow Kamada to terminate this Agreement pursuant to Section 13.2. The
Minimum Amount shall be adjusted on a pro-rata basis to compensate for any suspension of the Biologics License. Notwithstanding the
minimum
order provisions of this Section 5.14, Kamada shall use commercially reasonable efforts to meet Kedrion requirements for the
Product in
excess of the Minimum Amount. If the Order Shortfall occurs during the last Fiscal Year of the Term, the sole remedy of Kamada
shall be
as set forth in clauses (b), (x) and (y) of this Section 5.14.2. The provisions of this Section 5.14.2 shall survive the expiration or
earlier termination of this Agreement.”
shall be deleted in its entirety.
9
2.17
Section 6.5 of the Supply and Distribution Agreement, as follows:
“6.5
Financial Information. Kedrion shall provide Kamada sales reports regarding sale of the Product in the Territory on a quarterly
basis.
Should Kamada be reasonably required to provide its insurer with additional reasonable financial details regarding Kedrion, in
connection
with Kamada’s foreign trade risks insurance, Kedrion agrees to provide such information to Kamada, or, at Kedrion’s discretion,
directly to
the insurer (subject to such insurer being bound by customary confidentiality and nondisclosure agreement).”
shall be replaced in its entirety by
the following provisions:
“6.5
Financial Information. KBI shall provide Kamada sales reports regarding sale of the Product in the Territory on a quarterly
basis.
Quarterly reports shall include [*****].
Reports should be available to Kamada no later [*****] after
the start of each Calendar Quarter.
Should Kamada be reasonably required to provide its insurer with additional reasonable financial
details regarding KBI, in connection with
Kamada’s foreign trade risks insurance, KBI agrees to provide such
information to Kamada, or, at KBI’s discretion, directly to the insurer
(subject to such insurer being bound by customary
confidentiality and nondisclosure agreement).”
2.18
Section 3.4.7 of the Supply and Distribution Agreement shall be replaced in its entirety by the following
provisions:
3.4.7.
make written periodic reports, at least quarterly, commencing in the quarter in which the BLA is approved
by the FDA, specifying:
(i) the promotional activities carried out by KBI in the reported quarter; (ii) end users’ sales in the reported
quarter (iii) number of
KedRab accounts in the reported quarter; and (iv) any complaints and requests of customers of which KBI is aware
that KBI believes
have had, or in the future may have, a material and adverse effect on the marketing, sale or distribution of the Product
in the Territory
and Additional Territories, if applicable. KBI shall promptly report to Kamada any significant developments that could
be reasonably
foreseen to have an immediate material adverse impact on the marketing and sales activities of KBI with respect to the Product;
10
2.19
The following provisions shall be added to the end of Section 6 of the Supply and Distribution Agreement
as a new Section 6.7:
“Notwithstanding the above
or anything to the contrary in this Agreement, including anything to the contrary in the Third Amendment, which
is hereby canceled and
replaced, KBI shall have the right to cause to be issued from an American financial institution an autonomous and
irrevocable L/C in favor
of Kamada, guaranteeing the payment of each applicable invoice in accordance with the following terms: (a) the L/C
will be in a form acceptable
by the Parties, (b) the L/C will be provided to Kamada no later than [*****] from the invoice date issued by
Kamada, (c)
the L/C will be in a sufficient amount to cover each outstanding invoice amount, and (d) the L/C shall be valid for a period of not
less
than [*****] from the date of Kamada’s corresponding invoice.
Notwithstanding anything to the
contrary, the following payment terms will be applicable for any invoice issued by Kamada to KBI in each of
the calendar months of February,
May, August, and November (the “Mid-Quarter Months”) of each year:
(i) Invoices dated between the
1st day and the 15th day of any of the Mid Quarter Months, issued by Kamada to KBI, may be settled by KBI by
either:
(a) causing to issue an L/C pursuant to the terms above; or (b) affect a payment in the form of a wire transfer to be made [*****]
of
the applicable invoice date (the “Prompt Payment”);
(ii) Invoices
dated between the 16th day and the end of each of the Mid Quarter Months, issued by Kamada to KBI, will be settled by KBI in
the form of a Prompt Payment; and
(iii) Prompt
Payments will entitle KBI for a [*****] prompt pay discount of the paid invoice amount.
Examples for the avoidance of
doubt:
Assuming Kamada issues a $1,500,000
invoice on February 13th, then KBI may settle such invoice by either issuing a L/C (pursuant to the
terms above) in the amount
of $1,500,000 to be delivered to Kamada no later than March 13th, or otherwise wire, to Kamada’s bank account,
[*****]
($1,500,000 net of [*****] prompt pay discount) no later than March 13th.
Assuming Kamada issues a [*****]
invoice on [*****], Then KBI will settle such invoice by a wire, to Kamada’s bank account, of $[*****]
([*****] net of [*****] prompt pay discount) no later than September 20th.”
2.20
Section 12.2 of the Supply and Distribution Agreement, as follows:
“12.2. Regulatory Audits.
Kamada shall be responsible for all routine stability testing and sample retention as required by the FDA. Kamada
shall inform Kedrion
of an FDA audit pertinent to the Raw Materials, the Product, the Manufacturing Specifications, or the Handling
Specifications. Kamada
shall inform Kedrion in advance of planned F’A or other regulatory audits as soon as the schedule therefore is known.
Kamada shall
provide Kedrion with copies of any regulatory letters or documents issued by the FDA in connection with the audit or
inspection within
[*****] business days of Kamada’s receipt of such letter or document.”
shall be replaced in its entirety by
the following provisions:
“12.2. Regulatory Audits.
Kamada shall be responsible for all routine stability testing and sample retention as required by the FDA or any
other applicable
regulatory body. Kamada shall inform KBI of an FDA audit or any other regulatory audit pertinent to
the Raw Materials, the
Product, the Manufacturing Specifications, or the Handling Specifications. Kamada shall inform KBI
in advance of planned FDA or other
regulatory audits as soon as the schedule therefore is known. Kamada shall provide KBI
with copies of any regulatory letters or documents
issued by the FDA or any other regulatory body in connection with the
audit or inspection within [*****] business days of Kamada’s receipt
of such letter or document.”
11
2.21
Section 13.1 of the Supply and Distribution Agreement, as follows:
“13.1. Term. The term of this
Agreement shall commence on the Effective Date and, unless this Agreement is sooner terminated in accordance
with the provisions of this
Section 13 or extended further to the provisions of this Section 13.1, shall expire six (6) years after the date of the
notice set forth
in Section 5.14.1 (the “Term”). Kedrion shall have the option of extending the Term for an additional period of two (2)
Fiscal
Years, (the “Extended Term”), upon written notice to Kamada, given at least [*****] months prior to the expiration
of the original Term. If
Kedrion notifies Kamada of its election to extend the Term pursuant to the provisions of this Section 13.1, the
percentages of the Market
Share to be used in calculating the Minimum Amount for each Fiscal Year of the Extended Term shall be as set
forth in Section 5.14.1.”
shall be replaced in its entirety by
the following provisions:
“13.1 Term. The term of
this Agreement shall commence on July 18, 2011 (the “Effective Date”) and, unless this Agreement is sooner
terminated in accordance with the provisions of this Section 13 or extended further to the provisions of this Section 13.1, shall expire
on
December 31st, 2031 (the “Term”). KBI shall have the option of extending
the Term for an additional period of two (2) Fiscal Years (i.e.,
December 31st, 2033) (the “Extended
Term”), upon written notice to Kamada, given at least 12 (twelve) months prior to the expiration of the
original
Term (i.e., December 31st, 2030).”
2.22
The Purchase Prices as set for in paragraph 1A of Exhibit E of the Supply and Distribution Agreement
(as replaced pursuant to the Second
Amendment) shall be replaced in its entirety as follows:
“1.
Purchase Price.
A. Commencing as of January 1st,
2024, and for the duration of the Term and the Extended Term (if applicable), the sale price of vials of
KEDRAB from Kamada to KBI shall
be as follows:
(i) For annual sales from Kamada
to KBI of up to [*****] ml: [*****] of the Net Price per ml (as such term is defined in Exhibit E of the
Supply and Distribution
Agreement (as amended as by the Second Amendment);
(ii) For annual sales of the next
[*****] ml): [*****] of Net Price per ml;
(ii) For annual sales of any quantities
above [*****] ml annual sales: [*****] of Net Price per ml.
Example for the avoidance of doubt:
For annual supply of [*****] ml of KEDRAB by Kamada to KBI, the average transfer price will be
equal to [*****] of Net Price
per ml.”
2.23
Section 4.G of Exhibit E to the Supply and Distribution Agreement (as added pursuant to the Second
Amendment) is hereby deleted in its
entirety.
12
3.
Supply Shifting
During each calendar year of the Term
(and the Extended Term, if applicable), Kamada shall have the right to either [*****].
In the event Kamada exercises its rights
[*****] under this clause, the payment terms [*****] will be amended in such a way that the payment due
from KBI will be made [*****].
Example, for the avoidance of doubt: [*****].
4.
Press Release
Except to the extent required by applicable
law or by the rules or policies of any securities regulatory authority (including any stock exchange), no
Party shall make or allow to
be made any disclosure or public announcement concerning the existence of discussions about, or regarding the proposed
terms of the transactions
contemplated hereby without the prior written consent of the other Party as to the format and content of such disclosure.
Notwithstanding,
it is agreed that immediately after the Parties have signed this Fifth Amendment, Kamada may, in consultation with KBI, prepare and
issue
a press release relating to the execution of this Fifth Amendment and the material terms hereof.
5.
Integration and Continuation
5.1
In the event of any inconsistency amongst the provisions of this Fifth Amendment, the Supply and Distribution
Agreement and/or the MOU,
these provisions of this Fifth Amendment shall supersede.
5.2
This Fifth Amendment shall become an integral part of the Supply and Distribution Agreement as amended,
and all other provisions not
amended herein shall remain in full force and effect.
5.3
This Fifth Amendment may be executed in counterparts, each of which shall be deemed an original and all
of which together shall constitute
one and the same document.
[Signature page to follow]
13
IN WITNESS WHEREOF the Parties hereto have
signed this Fifth Amendment as of the Fifth Amendment Effective Date set forth hereinabove.
Kamada Ltd.
Kedrion Biopharma Inc.
By:
By:
Title:
Title:
Name:
Name:
By:
Title:
Name:
Exhibit 4.42
LEASE AGREEMENT
BY AND BETWEEN
TCP
LAS PALMAS PARTNERS, LTD. (“LANDLORD”)
AND
KAMADA
PLASMA, LLC (“TENANT”)
Dated: May 2, 2024
SUMMARY OF LEASE INFORMATION
Effective Date:
May 2, 2024
Possession Date:
Within five (5) business days of the Effective Date but in no event later than June 1, 2024.
Commencement Date:
The earlier of (a) opening for business in the Premises (which shall mean opening to the public and not for
training of employees) or (b) 180 days following Tenant’s receipt of building permits, which Tenant shall
diligently pursue.
Rent Commencement Date:
Shall have same date as Commencement Date.
Expiration Date:
See Section 3.a.
Landlord:
TCP Las Palmas Partners, Ltd
Address of Landlord:
500 North Akard, Suite 3240
Dallas, Texas 75201
Tenant:
Kamada Plasma, LLC, a Delaware limited liability company
Address of Tenant:
221 River St, 9th Floor,
Hoboken, NJ 07030
Attn: Legal Department
With a copy by email to: jonathanw@kamadaplasma.com
Guarantor:
KAMADA, LTD, an Israeli corporation (see Exhibit I)
Premises:
a portion of the Project known as Suite 250 consisting of approximately 11,100 rentable square feet, as
further described in Exhibit A, attached hereto and incorporated herein (the “Premises Rentable Area”)
Project:
803 Castroville Rd.
San Antonio, Texas 78237
Project Rentable Area:
approximately 256,737 square feet
Initial Lease Term:
Ten (10) years from the Rent Commencement Date
Base Rent:
For Lease Years 1 through 5, the Base Rent shall be [*****] per month. For Lease Years 6 through 10, the
Base Rent shall be [*****] per month.
Tenant’s Proportionate Share:
4.33% (11,100 SF / 256,737 SF)
Initial Monthly CAM Charge:
[*****] per month ([*****] psf/year) (2023 estimate). The CAM Charges are due and payable starting on
the FIRST (1st) day of Lease Year 1.
Initial Monthly Taxes and
Insurance Charge:
[*****] per month ([*****] psf/year for Taxes and [*****] psf/year for Insurance) (2023 estimate)
Security Deposit:
[*****] shall be due at Lease Execution. The Security Deposit will be returned to Tenant after the 60th
month of the Lease Year if Tenant has no instances of uncured monetary default as more fully described in
Section 3(c).
The Taxes and Insurance Charges are due and payable starting on the
FIRST (1st) day of Lease Year 1.
Page 2 of 26
LEASE
THIS LEASE AGREEMENT (the
“Lease”), made and entered into this ______ day of May 2024 (the “Effective Date”), by and
between TCP
LAS PALMAS PARTNERS, LTD. (“Landlord”), and KAMADA PLASMA,
LLC (“Tenant”).
1.
Lease Summary. The foregoing lease provisions set forth in the Lease Summary are an integral
part of this Lease, and each reference in the body
of the Lease to any provision shall be construed to incorporate all of the terms set
forth in the Lease Summary above with respect to any such
provision. Capitalized terms in the Lease shall have the meanings set forth
in the Lease Summary.
2.
Premises. In consideration of the obligation of Tenant to pay the rent and other charges
as provided in this Lease and in consideration of the other
terms and provisions of this Lease, Landlord hereby leases the Premises (as
described in the Lease Summary and more fully depicted on the floor
plan attached hereto as Exhibit A), located in that certain
Project (as described in the Lease Summary and more fully depicted on Exhibit A-1
attached hereto), to Tenant during the Lease
Term, subject to the terms and provisions of this Lease. Landlord shall not have any right under this
Lease to relocate the Premises.
Furthermore, subject to the restrictions set forth herein, all areas in the Project (except those areas leased to tenants
or held for
lease to tenants), including, parking areas, streets, driveways, aisles, sidewalks, curbs, delivery passages, loading areas, lighting
facilities, mechanical rooms, common areas (such as corridors and similar areas), other building common areas and all other areas situated
on or in
the Project which are designated by Landlord, from to time, are for non-exclusive use by, or for benefit of, all tenants (including
Tenant) of the
Property in common. Actual square footage for the Premises will be determined with all measurements computed in accordance
with BOMA
method of floor measurement. Tenant may elect to have the space measured prior to the Commencement Date.
3.
Term; Termination.
a.
Term. This Lease shall be effective upon the Effective Date written above. Landlord shall deliver
possession of the Premises to Tenant on
the Possession Date (as defined in the Lease Summary). In the event the Possession Date does not
occur within ONE HUNDRED
TWENTY (120) days following the Lease Condition Waiver, Tenant shall thereafter receive a rent abatement equal
to one day of
Monthly Base Rent for the number of days after such ONE HUNDRED TWENTIETH (120th) day and through and including
the
Possession Date (not to exceed SIXTY (60) days of rent abatement), with such abatement commencing at the beginning of lease year
TWO
(2); and further, if the Possession Date has not occurred on or before ONE HUNDRED EIGHTY (180) days following the Lease
Condition Waiver,
then Tenant may elect to terminate this Lease by written notice to Landlord. The Term of the Lease shall commence
upon the Commencement
Date and shall expire on the last day of the ONE HUNDRED TWENTIETH (120th) month following the Rent
Commencement Date (as the
same may be extended the “Expiration Date”), unless renewed as hereinafter provided (the “Term”).
The
period beginning on the Commencement Date and continuing until the last day of the month in the which the FIRST (1st) anniversary
of
the Rent Commencement Date occurs, and each TWELVE (12) month period thereafter shall hereinafter be called a “Lease Year”;
it
being agreed and acknowledged that the first Lease Year may contain more than TWELVE (12) months. Upon determination of the
Possession
Date and Commencement Date, Landlord shall execute and forward a memorandum in the form attached hereto as Exhibit C
to Tenant
for Tenant’s approval and execution.
Page 3 of 26
b.
Licenses. Tenant shall have up to ninety (90) days to receive its permits beginning on the Effective
Date. In the event Tenant is unable to
secure permits within the ninety (90) day period, Landlord shall have the right to step in and
assist Tenant in securing said permits on
Tenant’s behalf for an additional sixty (60) days. If Tenant is unable to obtain all required
or desired licenses, permits and approvals from
the FDA and any other governmental authorities as required for its Permitted Use and ongoing
business operations (the “Licenses”)
within two hundred and ten (210) days after submission, Tenant may terminate this
Lease by providing Landlord with written notice, and,
if Tenant so elects, then this Lease shall terminate as of the expiration of such
date as may be set forth in the termination notice and the
parties hereto shall be released from all liability hereunder, except for those
liabilities and obligations that expressly survive the
expiration or earlier termination of this Lease. In the event any such Licenses
are revoked by reason of acts or omissions not within
Tenant’s control during the Term, then Tenant shall have the right to terminate
this Lease by providing Landlord with written notice, and,
if Tenant so elects, then this Lease shall terminate as of the expiration of
such date as may be set forth in the termination notice and the
parties hereto shall be released from all liability hereunder, except
for those liabilities and obligations that expressly survive the
expiration or earlier termination of this Lease.
c.
Security Deposit. Landlord shall hold the Security Deposit, without liability for interest, as
security for performance by Tenant of all of
Tenant’s obligations under this Lease. Landlord may apply the Security Deposit (or
any part thereof) for: (i) any unpaid and past due
Rent; (ii) any sum expended by Landlord on Tenant’s behalf due to a
default under this Lease; and (iii) any expenses/damages incurred
by Landlord by reason of Tenant’s default and/or breach.
Should Landlord apply all or any portion of the Security Deposit, Tenant shall
remit to Landlord an amount sufficient to restore the Security
Deposit to its original balance within 30 days of demand therefor by
Landlord. Provided Tenant shall not default under this Lease beyond
applicable notice and cure periods, then Landlord shall return the
Security Deposit (or any remaining balance thereof) to Tenant, within
30 days after the Expiration Date. In the event of a transfer of
Landlord’s interest in the Premises, Landlord shall transfer
the Security Deposit to said transferee and upon such transferee’s assumption
of this Lease including the Security Deposit, Landlord
shall be relieved from all further obligation and liability to Tenant for the Security
Deposit. Notwithstanding anything to the contrary
in this Section, provided that Tenant is not then in default in the performance of any
term, covenant, condition or agreement provided
for in this Lease beyond applicable notice and cure periods, on 5th anniversary of the
Rent Commencement Date, Landlord agrees to return
the Security Deposit to Tenant.
d.
Renewal Options. Tenant shall have the right and option to renew this Lease for THREE (3) additional
periods of FIVE (5) years each,
next immediately ensuing after the expiration of the initial Term of this Lease and the subsequent renewal
periods by notifying Landlord
in writing not more than TWENTY-FOUR (24) months and not less than 120 days before the expiration of the
immediately preceding
initial Term or subsequent renewal Term of this Lease of Tenant’s intention to exercise its option to renew.
In the event that Tenant so
elects to extend this Lease, then, for such extended period of the Term, all of the terms, covenants and conditions
of this Lease shall
continue to be, and shall be, in full force and effect during such extended period of the Term hereof, except for
the Base Rent. The Base
Rent for any such renewal term shall be as follows:
Renewal Option 1, the Base Rent shall
be [*****] per month.
Renewal Option 2, the Base Rent shall
be [*****] per month.
Renewal Option 3, the Base Rent shall
be [*****] per month.
Page 4 of 26
4.
Rent. Beginning on the Rent Commencement Date, Tenant shall pay Base Rent in the amount
shown on the Base Rent schedule in the Lease
Summary in advance on the first day of each calendar month during the Term, such monthly
installment to be prorated for any partial calendar
month in which the Rent Commencement Date or Expiration Date shall occur. All amounts
(unless otherwise provided herein) other than the Base
Rent owed by Tenant to Landlord hereunder shall be deemed additional rent. Prior
to the Commencement Date, Landlord shall complete and
deliver to Tenant a Form W-9.
(a)
Late Charge. It is understood that the Base Rent and the Tenant’s Proportionate Share of
Operating Expenses are payable on or before the
FIRST (1st) day of the month, without offset or deduction of any nature. In
the event any Rent or other amount due by Tenant under this
Lease is not received within FIVE (5) business days after its due date for
any reason whatsoever, Tenant agrees to pay a late charge of
[*****] of the past due amount to cover the Landlord’s administrative costs
in handling the late payment, and it is further agreed that
these past due amounts shall bear interest from the date due until paid at
the lesser of [*****] per annum or the maximum non-usurious
rate of interest (the “Maximum Rate”) permitted by the applicable
laws of the State of Texas and the United States of America. Any
such interest shall be payable as additional Rent hereunder, and shall
be payable promptly by Tenant.
(b)
After the SECOND (2nd) late payment in any calendar year, Tenant shall, at Landlord’s
request, make all payments through electronic
funds transfer, also known as “ACH”. Such transfers shall occur automatically
on or before the FIRST (1st) day of each month directly
from the Tenant’s bank to the Landlord’s bank account.
Tenant shall complete such forms as are necessary to implement the ACH
payments.
(c)
The Landlord uses TCP Realty Services, LLC as its property management company. Until Tenant receives written
notice otherwise from
the Landlord, Tenant shall make all checks payable to Landlord (such checks to include Tenant’s suite # and
name of business in the
Memo section of the check) and have the payments delivered to the Landlord’s address above on or before
the 1st day of each month.
5.
Condition of Premises. Landlord is responsible for all code compliance at the Project (including
but not limited to ADA) for a) the common
areas, and b) ingress/egress to the Premises, and c) providing an area for employee parking
on the Project for the Premises. The foregoing areas
are more particularly shown on the depiction of the Project set forth on Exhibit
B.
Except for the above, Tenant shall accept
the Premises “AS IS” (including without limit storefront and utilities) and be responsible for the remodel
of the interior
of the Premises.
HVAC Replacement. Part of Tenant’s
Work, if deemed necessary by Tenant.
Storefront Replacement. AS IS
Utilities. Landlord shall deliver utilities
stubbed to the Premises.
6.
Use of Premises.
a.
Permitted Use. Tenant may exclusively occupy and use the Premises during the Term for purposes
of the operation of a blood plasma
donation center and similar procedures, including all incidental, related, and necessary elements and
functions of other recognized blood
plasma collection disciplines which may be necessary or desirable, including the sale of blood plasma
(the “Permitted Use”). Tenant
may operate during such days and hours as Tenant may determine, without the imposition
of minimum or maximum hours of operation
by Landlord and Tenant shall have full-time access to the Premises, and may operate up to TWENTY-FOUR
(24) hours per day, SEVEN
(7) days per week, THREE HUNDRED SIXTY-FIVE (365) days per year. The foregoing is not and shall not be construed
as an operating
covenant or any obligation of Tenant to open for business or to continually operate at any time.
Page 5 of 26
b.
Prohibited Uses. No overnight lodging shall be permitted on the Premises. Tenant shall not,
without Landlord’s prior written consent,
keep anything within the Premises or use the Premises for any purpose (other than the Permitted
Use) that increases the insurance
premium cost or invalidates any insurance policy carried on the Premises or other parts of the Project.
All property kept, stored or
maintained within the Premises by Tenant shall be at Tenant’s sole risk. Tenant shall not conduct within
the Premises any fire, auction,
bankruptcy, “going out of business”, “lost our lease”, or similar sales or operate
within the Premises a “wholesale” or “factory outlet”
store, a cooperative store, a “second-hand” store,
a “surplus” store or a store commonly referred to as a “discount house”. Tenant shall not
advertise that it sells
its products or services at “discount”, “cut-price”, or “cut-rate” prices. Tenant shall not (a) permit any
objectionable
or unpleasant odors to emanate from the Premises; (b) place or permit any radio, television, loudspeaker or amplifier on
the roof or
outside the Premises or where the same can be seen or heard from outside the Premises; (c) except as otherwise set forth herein,
place any
antenna, awning or other projection on the exterior of the Premises; (d) take any other action that would constitute a legal
nuisance or
would materially disturb or endanger other tenants of the Project or unreasonably interfere with their use of their respective
premises; (e)
operate any nightclub, bar or other business serving alcoholic beverages, adult bookstore, massage parlor, head shop, or
store selling
marijuana or drug paraphernalia, any adult entertainment or sexually oriented business; (f) violate any governmental law,
ordinance, rule
or regulation, or (g) operate any business that would violate the exclusives set forth on Exhibit H.
Tenant shall take good
care of the Premises and keep the same free from material physical waste at all times. Tenant shall keep the
Premises neat, clean and
free from dirt or rubbish at all times, and shall store all trash and garbage within the Premises, and provide for
the regular pick-up
of such trash and garbage at Tenant’s expense. Receiving and delivery of goods and merchandise and removal of
garbage and trash shall
be made only in the manner and areas prescribed by Landlord. Tenant shall not operate an incinerator or burn
trash or garbage within the
Project. Tenant shall maintain all display windows in a neat, attractive condition, and shall keep all display
windows, exterior electric
signs and exterior lighting under any canopy in front of the Premises lighted from dusk until 11:00 p.m. every
day, including Sundays
and holidays. Tenant shall procure at its sole expense all permits and licenses required for the transaction of
business in the Premises
and otherwise comply with all applicable laws, ordinances, and governmental regulations.
c.
Exclusive Use. Landlord shall not sell, rent or permit any portion of the Project to be occupied
or used by any other person or business
that performs blood plasma collection services (the “Exclusive Use”). Landlord
shall not display or permit to be displayed upon the
Project any advertisement for any such competing business other than Tenant’s
advertisement(s) for Tenant’s business(es). Landlord
further covenants that in any lease, deed or other agreement hereafter executed
by Landlord affecting the Project, Landlord will insert a
restrictive clause preventing such property from being used for the Exclusive
Use by anyone other than Tenant or its affiliates or assigns.
In the event of Landlord’s breach of this provision, Tenant’s remedies shall
be to obtain injunctive relief, to sue Landlord for lost profits,
and to abate Tenant’s obligation for Rent for a period beginning on
the date the competing business begins to operate in the referenced
area and ending on the date the competing business ceases to operate
within the referenced area. If the competing business continues to
operate in the referenced area for more than SIX (6) months, then
in such event Tenant may elect to terminate this Lease by written notice
to Landlord, with such termination to have an effective date
as set forth in such notice of termination and Landlord shall reimburse
Tenant for Tenant’s unamortized costs expended by Tenant
to improve the Leased Premises. This paragraph shall be effective during the
Term and any renewal or extension thereof. Notwithstanding
the foregoing, the restrictions above do NOT apply to current tenants in the
Project.
d.
Nuisance. Should Landlord lease space within the Project to any tenant that materially impairs
Tenant’s ability to use the Premises for the
Permitted Use, including but not limited to any business that involves loud noises
that can be heard within the Premises and disturb
Tenant’s employees and customers, strong food or chemical odors that emanate from
such tenant’s premises and disturb Tenant’s
employees and customers , or other material nuisance making it unreasonable for
Tenant to continue its normal business operations in the
Premises, Tenant shall promptly notify Landlord of such nuisance and disruption.
In the event the nuisance and disruption continues for
in excess of TEN (10) days after Tenant delivers such notice and Tenant actually
ceases using the Premises for the Permitted Use as a
direct result of such nuisance and disruption, Tenant shall receive a rent abatement
equal to one day of Base Rent and Operating Expenses
for each day such disruption continues following the date Tenant ceased use of the
Premises due to such nuisance and disruption up to a
maximum of THIRTY (30) days.
Page 6 of 26
If such nuisance and
disruption continues for more than SIXTY (60) days after Tenant ceases use of the Premises due to such
nuisance and disruption, such nuisance
and disruption shall constitute Landlord Default, subject to Section 16.2, and Tenant, as its sole
and exclusive remedy to the nuisance
and disruption, shall have the right to terminate this Lease by providing written notice specifying
the effective date of Tenant’s
termination.
The foregoing is not
intended to be a general prohibition on Landlord leasing space in the Project to restaurants, health or fitness
clubs or bingo halls.
It is intended to allow the Tenant to terminate the Lease in the event that a nuisance makes it unreasonable for the
Tenant to continue
to operate in the Premises.
e.
Permitted Use not Allowed. In the event at any time after the Commencement Date of this Lease the
use of the Premises as a blood
plasma collection facility becomes illegal by reason of acts not within Tenant’s control, notwithstanding
any other permitted uses, Tenant
may terminate this Lease with ninety (90) days prior written notice and thereafter neither party shall
have any obligations hereunder after
the date of termination, except for those liabilities and obligations that expressly survive the
expiration or earlier termination of this
Lease.
f.
Delay in Termination. Landlord hereby acknowledges that in order to provide a continuum of care
to Tenant’s donors, Tenant may delay
the effective date of Tenant’s termination of this Lease under any provision of the Lease
giving Tenant the right to terminate until such
time as Tenant has established an alternative location for the Permitted Use and any such
delay shall not operate as a waiver of Tenant’s
termination rights up to a maximum of ONE HUNDRED EIGHTY (180) days and Tenant must
pay full base rent and all other charges
due under the Lease during such period.
7.
Assignment/Subletting.
a.
Tenant shall not assign this Lease, or sublet the Premises, or any part thereof, without Landlord’s
prior written consent which consent
shall not be unreasonably withheld, conditioned or delayed. Prior to any sublease or assignment, Tenant
shall first notify Landlord in
writing of its election to sublease all or a portion of the Premises or to assign this Lease or any interest
thereunder. At any time within
FIFTEEN (15) days after service of said notice, Landlord shall notify Tenant that it consents or refuses
to consent to the sublease or
assignment. A failure by Landlord to respond within such FIFTEEN (15) day period shall be deemed to be a
consent. Tenant shall not
be released from liability for the Tenant’s Lease obligations upon any assignment or subletting, unless
Landlord expressly agrees
to such release in writing at the time of such assignment or subletting.
b.
Landlord shall not have the right to recapture any sublease or assignment space. Any denial of such sublease
or assignment by Landlord
as hereinabove provided must be predicated upon a commercially reasonable basis for such denial. Tenant and
Landlord shall equally
share in any net profits paid in connection with a sublease or assignment in excess of Tenant’s Rent obligations
hereunder.
c.
Notwithstanding the foregoing, no consent of Landlord is required for Tenant to assign or otherwise transfer
(by operation of law or
otherwise) this Lease or any of its rights hereunder to: (a) any person, corporation, partnership or other entity
which acquires all or
substantially all of the business or assets of Tenant or stock in Tenant; (b) any person, corporation, partnership
or other entity which
controls, is controlled by or is under common control with Tenant; (c) any successor corporation or other entity
resulting from a merger,
consolidation or reorganization (other than in bankruptcy context) of Tenant; or (d) any licensees or franchisees.
Tenant shall give
Landlord written notice of such assignment or sublease to a permitted transferee within thirty (30) days of its completion.
Page 7 of 26
d.
No such assignment or other transfer, in whole or in part, of any Tenant’s rights or obligations
under this Lease shall be or operate as a
release of Tenant hereunder and Tenant shall remain responsible for performing Tenant’s
obligations hereunder should Tenant’s assignee
or transferee fail to perform any such obligations, unless specifically provided
otherwise by Landlord in writing. Any such assignee or
sublessee shall (1) be permitted to use the Premises for any lawful use in compliance
with applicable Laws, to the extent such use does
not conflict with any prohibited uses or other tenant exclusives then in effect at the
Project, and (2) be permitted to exercise Tenant’s
renewal options under this Lease.
8.
Operating Expenses and Utilities.
a.
Beginning at the start of Lease Year 1, Tenant shall pay “Tenant’s Proportionate Share”
(as defined herein) of all Taxes (as defined
below), common area maintenance charges for the Project (“CAM Charges”)
and insurance premiums for the Project (“Insurance”), in
advance, in equal monthly installments at the time of the payment
of Base Rent, based on Landlord’s estimate of the Taxes, CAM
Charges and Insurance for the calendar year in question (which estimate
may be revised by Landlord from time to time but not more than
once during any calendar year). For reference purposes, Taxes, CAM Charges
and Insurance are collectively referred to as the
“Operating Expenses” for the Project and Premises. Promptly after the
actual Operating Expenses for a calendar year are determined by
Landlord (but no later than April 30), Landlord shall provide Tenant with
a statement of such actual Operating Expenses for such
calendar year and Tenant, within THIRTY (30) days, shall pay to Landlord any deficiency
subject to the limitations set forth in this
Lease, which obligation shall survive the expiration or termination of this Lease. If such
statement shows an overpayment by Tenant, then
any surplus paid by Tenant shall be credited to Tenant’s next monthly installment of Operating
Expenses or, if this Lease has expired or
been terminated, be paid to Tenant within THIRTY (30) days following delivery of such statement.
b.
“Taxes” shall mean real property taxes, public charges and assessments assessed or
imposed upon the building, in which the Premises is
located, provided, however, that any one time (as opposed to on-going) special assessments
for public improvements having a useful
economic life exceeding the remaining term of this Lease shall be prorated between Landlord and
Tenant using a straight-line method,
based on the proportion of that economic life falling within the remaining term of the Lease. Taxes
shall not include any penalties or
interest for late or partial payment nor any income, franchise, margin, inheritance, estate, transfer,
excise, gift or capital gain taxes, that
are or may be payable by Landlord or that may be imposed against Landlord or against the rents
payable hereunder. Taxes may include
reasonable fees for tax consultants paid to contest the Taxes. Landlord shall take advantage of any
savings in Taxes that may be achieved
by early payment or payment in installments. Should Landlord choose not to contest any Taxes, Tenant
shall have the right to contest the
Taxes in Landlord’s name and with Landlord’s reasonable cooperation, at no expense to
Landlord. Landlord, at Tenant’s sole expense,
shall join in any such contestation proceedings if any Law shall so require.
c.
“Tenant’s Proportionate Share” is the quotient obtained by dividing the Premises Rentable
Area by the Project Rentable Area. Tenant’s
Proportionate Share as of the Commencement Date will be 4.33% (11,100 SF
/ 256,737 SF). Tenant’s Proportionate Share shall be
adjusted in the event the Project Rentable Area increases at any time.
Landlord represents that the Project Rentable Area has been
determined without reference to whether such area is actually leased, leasable,
occupiable or occupied.
Page 8 of 26
d.
Tenant’s Proportionate Share of initial Operating Expenses is estimated at [*****] per square foot per
annum for 2024. Thereafter, the
“Controllable Operating Expenses” portion of Tenant’s Operating Expenses shall
not increase by more than FIVE PERCENT (5%) per
year on a non-cumulative and non-compounding basis (provided further that in no event
shall the Controllable Operating Expenses
increase more than FIVE PERCENT (5%) in any ONE (1) year over the prior year). “Controllable
Operating Expenses” shall mean
only those items included in Operating Expenses where the cost or expense thereof shall be within
the reasonable ability of Landlord to
control. Specifically excluded from Controllable Operating Expenses, without limitation,
are the costs and expenses of Taxes, Insurance,
security and utilities for the Project.
e.
Tenant shall pay the net cost (after applying any discounts or incentives) of all utilities and other
services necessary in the operation of the
Premises, including but not be limited to, gas, fuel oil, electrical, telephone and other utility
charges. The Premises shall be separately
metered for all utilities, including gas, water and electricity.
f.
Landlord shall make available at the Landlord’s headquarters in Dallas, Texas, and online,
true and accurate records of items that
constitute Operating Expenses. Such records shall be open for inspection from time to time by
Tenant or its duly authorized
representative for a period of THREE (3) years after the close of each calendar year. If any audit of Landlord’s
submitted reports shall
disclose an overcharge, Landlord shall promptly pay to Tenant, within THIRTY (30) days, the amount of such overcharge,
and if such
audit discloses increase of Operating Expenses greater than THREE PERCENT (3%) Landlord shall reimburse Tenant its actual
reasonable third party costs incurred in connection with such audit.
g.
All sums (other than the Base Rent) which may be due and payable under this Lease to the Landlord shall
be deemed to be additional rent
hereunder and in the event that Base Rent shall be prorated or shall abate pursuant to the terms of this
Lease then such additional rent
shall be prorated or abate to the same extent and in the same manner, unless otherwise specifically provided
for in this Lease. Base Rent
and Tenant’s Proportionate Share of Operating Expenses are collectively referred to herein as “Rent.”
h.
Anything in this Lease to the contrary notwithstanding, the following items shall be excluded from the
calculation of Operating
Expenses:
i.
any expenses which under generally accepted accounting principles, consistently applied, and sound management
practices
would not be considered a normal operating expense for a Project;
ii.
all costs associated with the operation of the business of the entity which constitutes “Landlord”
(as distinguished from the costs
of personnel employed to perform common area maintenance of the Project) including, but not limited to,
Landlord’s or
Landlord’s unallocated managing agent’s general corporate overhead and general administrative expenses;
iii.
costs incurred by Landlord in connection with the correction of defects in design and construction of
the Project, regardless of
the Project’s age;
iv.
all costs of a capital nature, including, but not limited to, capital improvements, capital repairs, capital
equipment, and capital
tools, all as determined in accordance with generally accepted accounting principles, consistently applied, and
sound
management practices;
v.
expenses, in connection with services or other benefits, which are provided to another tenant or occupant
and do not benefit
Tenant;
vi.
overhead or profits paid to subsidiaries or affiliates of Landlord, or to any party as a result of a noncompetitive
selection process,
for management or other services to the Project, or for supplies or other materials, to the extent that the costs of
such services,
supplies, or materials exceed the costs that would have been paid had the services, supplies or materials been provided
by parties
unaffiliated with the Landlord on a competitive basis and are consistent with those incurred by similar projects in the same
metropolitan area in which the Project is located with exception management fee of five percent 5% of gross revenues is
acceptable;
Page 9 of 26
vii.
proportionate share of wages, salaries and other compensation paid to any executive employee of Landlord
and/or Landlord’s
managing agent not related to property management of the Project;
viii.
any cost or expense related to removal, cleaning, abatement or remediation of hazardous substances, hazardous
materials and
hazardous wastes in, under or about the Project or the land upon which the Project is located, including without limitation,
such
substances or materials in the ground water and/or soil;
ix.
advertising and promotional costs including tenant relation programs and events;
x.
any “sinking funds,” capital reserve funds or reserves and any accounts, assessments, reserves
or funds for future repairs or
replacement of the Project or other improvements to the land;
xi.
Landlord’s gross receipts taxes, personal and corporate income taxes, inheritance and estate taxes,
other business taxes and
assessments, franchise, gift and transfer taxes, and any real estate taxes relating to a period other than the
term of this Lease;
xii.
any fines, costs, penalties or interest resulting from the negligence, misconduct or omission of the Landlord
or its agents,
contractors, or employees;
xiii.
any rental payments and related costs pursuant to any ground lease of land underlying all or any portion
of the Project;
xiv.
any costs, fees, dues, contributions or similar expenses for political, charitable, industry association
or similar organizations;
xv.
any rental paid for the Landlord’s management and/or leasing office;
xvi.
costs incurred in connection with the repair of damage to the Project in connection with any type of casualty,
event of damage or
destruction or condemnation;
xvii.
costs incurred in connection with upgrading the Project to comply with disability insurance requirements,
or life safety codes,
ordinances, statutes, or other laws, including without limitation the Americans with Disabilities Act, including
penalties or
damages incurred as a result of non-compliance; and
xviii.
management fees exceeding FIVE PERCENT (5%) of the gross revenues.
9.
Alterations. Tenant shall not make any alterations, or additions or leasehold improvements
to the Premises following the Commencement Date
(“Alterations”) without Landlord’s prior written consent in each
and every instance, such consent not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, Tenant shall have the right
to make non-structural Alterations to the Premises which do not exceed in cost [*****]
in the aggregate during each Lease Year, or Alterations that are of a cosmetic nature such as painting, wallpapering
and carpeting, or involves
redecorating the interior of the Premises; is not visible from outside the Premises; will not affect the systems
or structure of the Premises,
including work to be performed inside the walls or above the ceiling of the Premises, without
Landlord’s consent. In addition, in the event the
FDA, MHRA, or any other regulatory or governmental agency requires any Alterations
to the Premises for the continued operations of Tenant’s
business, then Tenant shall be permitted to make such Alterations to the
Premises with prior notice to, but without consent of, Landlord. All
Alterations which may be made by Tenant shall be the property of
Tenant and Tenant shall be entitled to remove from the leased Premises during
the Term all furniture, removable trade fixtures, equipment
and personal property and any freezers located in the Premises (“Fixtures”) installed
or located on or in the leased
Premises provided that Tenant repair any and all damages done by the removal of the foregoing. All Alterations and
tenant improvements
shall be surrendered with the Premises at the termination of this Lease. To the maximum extent permitted by applicable
Laws, Landlord
hereby waives any rights which Landlord may have, as to any of Tenant’s furniture, fixtures, equipment, personal
property, in the
nature of a Landlord’s lien, security interest or otherwise and further waives the right to enforce any such lien or security
interest.
Page 10 of 26
10.
Signage. Tenant shall have the right to affix Tenant’s standard signage, in accordance
with the rules and regulations of the Project, including a sign
on the exterior of the building above the Premises, entrance to the Premises
signage, and a panel with Tenant’s name and/or logo on each pylon
sign at the Project (which pylon/monument signs are depicted on
Exhibit B, as well as Tenant’s standard entrance door signage). All such signs
shall comply with all applicable zoning Laws
and Landlord’s prior approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Landlord shall permit Tenant’s
building signage to be angled and oriented such that the visibility of the corner unit is enhanced. Landlord,
at Landlord’s expense,
shall timely provide space for Tenant’s designated name(s) on any directory boards located in the Project. There shall be no
additional
charge to Tenant for any such signage rights.
11.
Environmental.
a.
Tenant shall not cause or permit any hazardous or toxic substances, materials or waste, including, without
limitation, asbestos, mold, lead
paint, PCBs, petroleum and petroleum products (“Hazardous Substances”) to be used,
generated, stored or disposed of in, on or under,
or transported to or from the Premises unless such Hazardous Substances are reasonably
necessary for Tenant’s business conducted in the
Premises; provided, however, Tenant shall at all times and in all material respects
comply with all local, state, and federal laws,
ordinances, rules, regulations and orders, whether now in existence or hereafter adopted
relating to Hazardous Substances or otherwise
pertaining to the environment (the “Environmental Laws”) and further
provided that Tenant shall periodically cause to be removed from
the Premises such Hazardous Substances placed thereon by Tenant or Tenant’s
agents, servants, employees, guests, invitees and/or
independent contractors in accordance with good business practices, such removal
to be performed by persons or entities duly qualified to
handle and dispose of Hazardous Substances. Without limiting the generality of
the foregoing, Landlord acknowledges that the following
Hazardous Substances, among others, are required for Tenant’s business operations:
Accel TB, Alcohol Gel Moisturizing Hand Sanitizer,
Alcohol Prep Pad, Anticoagulant Sodium Citrate (Baxter), Anticoagulant Sodium Citrate
(Haemonetics), Chloraprep, Chlorine Bleach,
CRC Ultra-Lite Spray, Epipen, Fingernail Dye (RI-10), Glycerin, Green Z, HemataCHEK, Instant
Ice Pack, IO-Gone, Isopropyl Alcohol
70%, Isopropyl Alcohol 90%, Opti-Cide-3, Povidone Iodine Swabsticks, Purell Hand Sanitizer, Propylene
Glycol, Refractrol Low,
Refractrol Normal, Sani-Cloth Plus Germicidal Disposable Cloth, Vacuette Z No Additive 3ml, and Vacuette Z Serum
Sep Gel. Upon the
expiration or earlier termination of this Lease, Tenant shall cause all Hazardous Substances placed on the Premises
by Tenant to be
removed, at Tenant’s cost and expense, from the Premises and disposed of in strict accordance with the Environmental
Laws.
b.
Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect, and hold Landlord
harmless, from and against
any and all claims, liabilities, penalties, fines, judgment, forfeitures, losses, costs (including clean-up
costs) or expenses (including
reasonable attorney’s fees, consultant’s fees and expert’s fees) for the death of or injury
to any person or damage to any property
whatsoever, arising from or caused in whole or in part, directly or indirectly, by (a) the presence
after the Commencement Date in, on,
under, or about the Premises of any Hazardous Substances caused by Tenant or its agents, servants,
employees, guests, invitees and/or
independent contractors; (b) any discharge or release by Tenant or its agents, servants, employees,
guests, invitees and/or independent
contractors after the Commencement Date in or from the Premises of any Hazardous Substances; (c) Tenant’s
use, storage, transportation,
generation, disposal, release or discharge after the Commencement Date of Hazardous Substances, to, in,
on, under, about or from the
Premises; or (d) Tenant’s failure after the Commencement Date to comply with any Environmental Law.
Page 11 of 26
c.
Landlord shall indemnify, defend (by counsel reasonably accepted to Tenant), protect, and hold Tenant
harmless, from and against any
and all claims, liabilities, penalties, fines, judgment, forfeitures, losses, costs (including clean-up
costs) or expenses (including reasonable
attorney’s fees, consultant’s fees and expert’s fees) for the death of or injury
to any person or damage to any property whatsoever, arising
from or caused in whole or in part, directly or indirectly, by (a) the presence
prior to the Commencement Date in, on, under, or about the
Premises or Project of any Hazardous Substances; (b) any discharge or release
prior to the Commencement Date in or from the Premises
or Project of any noxious or Hazardous Substances; (c) the use, storage, transportation,
generation, disposal, release or discharge of
Hazardous Substances by Landlord to, in, on, under, about or from the Premises or Project;
(d) Landlord’s failure to comply with any
Environmental Law; or (e) any Hazardous Substances to the extent not due to any act or
omission of Tenant or its agents, servants,
employees, guests, invitees and/or independent contractors. Landlord agrees to remediate at
Landlord’s expense immediately upon receipt
of notice from Tenant any condition described in (a) through (e) of the previous sentence.
d.
Landlord represents and warrants to Tenant that (i) to the best of Landlord’s knowledge, there are
no Hazardous Substances on the
Premises, including without limitation asbestos or mold, and (ii) Landlord has received no notice from
any governmental or private entity
relating to Hazardous Substances on the Premises.
e.
Landlord hereby covenants and agrees that if any Hazardous Substances are discovered at the Premises attributable
to the period prior to
the Possession Date or which has been caused by anything other than by Tenant’s acts or omissions, Landlord
shall, upon written notice
from Tenant, promptly remediate such Hazardous Substances. If Landlord shall not commence such remediation
within TEN (10) days
following written notice from Tenant and Tenant determines in Tenant’s sole discretion that such remediation
is necessary for the safety
of Tenant’s patients and employees, Tenant may, at its option, cause such remediation work to be performed
at Landlord’s cost and
expense. Upon the completion of the remediation work, Tenant shall furnish Landlord with a written statement
of the cost of the
remediation work and Landlord shall reimburse Tenant for such cost of such remediation work within TEN (10) days of
Landlord’s
receipt of Tenant’s statement. Should Landlord fail to reimburse Tenant within said TEN (10) day period, then Tenant
may, at its option,
offset such amount against Rent. Notwithstanding the foregoing, in the event that the remediation work cannot be substantially
completed
or is not completed within SIXTY (60) days and Tenant is unable to utilize the Premises in Tenant’s reasonable discretion,
Tenant may
elect to terminate the Lease upon THIRTY (30) days written notice to Landlord.
f.
Tenant shall promptly deliver to Landlord copies of all notices made by Tenant to, or received by Tenant
from, any state, county,
municipal or other agency having authority to enforce any environmental law (“Enforcement Agency”)
or from the United States
Occupational Safety and Health Administration concerning environmental matters or Hazardous Substances at the
Premises. Landlord
shall promptly deliver to Tenant copies of all notices received by Landlord from any Enforcement Agency or from the
United States
Occupational Safety and Health Administration concerning environmental matters or Hazardous Substances at the Premises or
Project.
g.
If any applicable Environmental Laws require that biohazards be removed and disposed of separately from
ordinary trash, Tenant shall
make arrangements at Tenant’s sole liability, risk, cost and expense for the storage of the biohazards
at the Premises in approved
containers while awaiting removal and disposal, and for the subsequent removal and disposal of such biohazards
in approved containers
from the Project directly with a qualified and licensed disposal company at a lawful disposal site. Tenant shall
comply with the any
applicable Environmental Laws to handle the storage, removal and disposal of the biohazards in and on the Project. Landlord
assumes no
duty, obligation, or liability with respect to Tenant’s biohazard materials.
Page 12 of 26
12.
Damage to Premises by Fire or Casualty. In the event the Premises shall be damaged by fire
or other casualty during the Term of this Lease,
whereby the same shall be rendered untenantable, then:
a.
If the damage to the Premises is so substantial that either: (i) the repair, restoration or rehabilitation
of such damage cannot reasonably be
expected to be substantially completed within ONE HUNDRED EIGHTY (180) days from the date of such
damage or (ii) so much of the
Premises is destroyed or rendered untenantable by such fire or other casualty as to make use of the
Premises as a blood plasma collection
center operating at least FIFTY PERCENT (50%) of the collection stations operating prior to the
fire or casualty impracticable (unless
caused by the gross negligence or willful misconduct of Tenant), then Tenant may elect to terminate
this Lease by giving written notice to
Landlord within SIXTY (60) days of the date of such fire or casualty,
b.
If the damage to the Premises is so substantial that (i) the estimated repair costs exceed [*****] and
such damage has occurred within the
last ONE HUNDRED EIGHTY (180) days of the then current term and Tenant does not exercise its next
available renewal option, if any
or (ii) the building in which the Premises are located is damaged to the extent of FIFTY PERCENT (50%)
or more of the monetary value
thereof, then Landlord may elect to terminate this Lease by giving written notice to Tenant within SIXTY
(60) days of the date of such
fire or casualty; or
c.
If not so terminated, Landlord shall proceed with all due diligence to repair, restore or rehabilitate
the Premises, to substantially their
former condition immediately prior to such damage or destruction, at Landlord’s expense (unless
caused by the gross negligence or
willful misconduct of Tenant), in which latter event this Lease shall not terminate.
d.
If the Premises are rendered untenantable by fire or other casualty, there shall be an abatement of Rent
due Landlord by Tenant for the
period of time during which the Premises are untenantable. If the restoration is not substantially completed
within ONE HUNDRED
EIGHTY (180) days of such damage, (unless caused by the gross negligence or willful misconduct of Tenant) Tenant shall
have the
option to terminate this Lease by written notice to Landlord. In the event of any termination of this Lease, Rent shall be paid
only to the
date of such fire or casualty.
e.
Notwithstanding the foregoing provisions of this Section 12, in the event that insurance proceeds
applicable to Alterations or Tenant
Improvements constructed by Tenant at its expense are made available to Tenant, Tenant shall be responsible
for restoring such
Alterations and/or Tenant Improvements; provided, however, (unless caused by the gross negligence or willful
misconduct of Tenant) that
the Rent abatement provided for shall continue during such period of restoration so long as Tenant is diligently
pursuing the completion
of such restoration. In the event that Landlord does not restore the Premises, Tenant may retain all insurance
proceeds applicable to
Alterations and Tenant Improvements constructed by Tenant at its expense.
13.
Eminent Domain.
a.
Taking. If by any lawful authority through condemnation or under the power of eminent domain: (i) the
whole of the Premises shall be
permanently taken; (ii) less than the entire Premises shall be permanently taken, but the remainder
of the Premises, are not, in either
Landlord’s or Tenant’s judgment, fit for Tenant to carry on its business therein; (iii) Landlord
determines, in its sole judgment, that after
such taking adequate parking space will not be available near the Premises; (iv) there
is any substantial impairment of ingress or egress
from or to or visibility of the Premises; or (v) all or any portion of the common
areas shall be taken resulting in a material interference
with the operations of or access to Tenant’s business, then in any such
event, either Tenant or Landlord may terminate this Lease,
effective as of the date of such taking, and the Rent and other sums paid or
payable hereunder shall be prorated as of the date of such
termination.
Page 13 of 26
b.
Rent Adjustment. Unless this Lease is terminated as above provided, commencing with the date possession
is acquired by the
condemning authority the Rent and other sums payable hereunder shall be reduced by the then applicable per square foot
Rent as by the
number of square feet taken and Landlord shall restore the Premises, at Landlord’s cost and expense to a complete
architectural unit, and
Tenant’s Proportionate Share will be recalculated based on the applicable square footage. During such restoration
the Rent shall be abated
to the extent the Premises are rendered untenantable.
c.
Awards. All compensation awarded or paid in any such eminent domain proceeding shall belong to
and be the property of Landlord
without any participation by Tenant, except that nothing contained herein shall preclude Tenant from prosecuting
any claim directly
against the condemning authority in such eminent domain proceeding for its relocation costs, its unamortized leasehold
improvements
and trade fixtures, loss of business and the like.
14.
Right of Entry by Landlord. Landlord, or any of its agents, shall have the right to enter
said Premises during all reasonable hours and upon at
least ONE (1) business day prior notice (except in cases of emergency), to perform
its obligations under this Lease, examine the same or to exhibit
said Premises to prospective purchasers or lenders or, during the last
SIX (6) months of the Term to prospective tenants. Any work done by
Landlord to Premises shall be performed during hours that Tenant is
not open for business (except in emergencies) unless Tenant, in the exercise
of its reasonable discretion otherwise agrees. Any restoration
work or alteration work at the Premises which is necessitated by or results from
Landlord’s entry, including, without limitation,
any work necessary to conceal any element whose presence is permitted hereunder, shall be
performed by Landlord at its expense or, at
Tenant’s election, by Tenant on Landlord’s behalf and at Landlord’s sole cost and expense. Landlord
shall be liable
for all loss, damage, or injury to persons or property and shall indemnify and hold Tenant harmless from all claims, losses, costs,
expenses
and liability, including reasonable attorney’s fees resulting from Landlord’s entry except to the extent caused by the grossly
negligent or
intentional act of Tenant or its contractors, agents, employees or licensees. Landlord and its representatives shall use
commercially reasonable
efforts to avoid interfering in Tenant’s ongoing business operations during any such entry. Tenant shall
have the right to have a representative
accompany Landlord during any such entry. If Landlord’s entry into the Premises pursuant
to this Lease interferes with the conduct by Tenant of it
business to such an extent that Tenant, in the exercise of its reasonable business
judgment, must close the Premises or is unable to use SEVENTY-
FIVE PERCENT (75%) of the Premises for business for TWO (2) or more business
days, then Rent shall totally abate for each day or portion
thereof that such interference continues.
15.
Indemnity.
a.
Subject to Section 18 below, Tenant shall indemnify, defend and hold harmless Landlord and its
officers, directors, employees, attorneys
and agents from and against any and all claims, demands, causes of action, judgments, costs,
expenses, and all actual losses and damages
arising from Tenant’s use, maintenance or occupancy of the Premises or from the conduct of
its business or from any activity, work, or
other acts or things done, permitted or suffered by Tenant in or about the Premises, or arising
from any breach or default in the
performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising
from any gross negligence or
willful or criminal misconduct of Tenant, or any officer, agent, employee, independent contractor, guest,
or invitee thereof, and from all
costs, reasonable attorney fees and disbursements, and liabilities incurred in the defense of any such
claim or any action or proceeding
which may be brought against, out of or in any way related to this Lease.
Page 14 of 26
b.
Subject to Section 18 below, Landlord shall indemnify, defend and hold harmless Tenant and its
officers, directors, employees, attorneys
and agents from and against any and all claims, demands, causes of action, judgments, costs,
expenses, and all actual losses and damages
arising from Landlord’s use, maintenance, occupancy or ownership of the Project and
common areas or from the conduct of its business
or from any activity, work, or other acts or things done, permitted or suffered by Landlord
in or about the Project, common areas, or
Premises, or arising from any breach or default in the performance of any obligation on Landlord’s
part to be performed under the terms
of this Lease, or arising from the gross negligence or willful or criminal misconduct of Landlord,
or any officer, agent, employee,
independent contractor, guest, or invitee thereof, and from all costs, reasonable attorney fees and disbursements,
and liabilities incurred in
the defense of any such claim or any action or proceeding which may be brought against, out of or in any way
related to this Lease.
c.
THE INDEMNITIES CONTAINED IN THIS SECTION 15: (A) ARE INDEPENDENT OF TENANT’S AND LANDLORD’S
INSURANCE, AS APPLICABLE, (B) WILL NOT BE LIMITED BY COMPARATIVE NEGLIGENCE STATUTES OR DAMAGES
PAID UNDER THE WORKERS’ COMPENSATION
ACT OR SIMILAR EMPLOYEE BENEFIT ACTS, (C) WILL SURVIVE THE
END OF THE TERM, AND (D) WILL APPLY EVEN IF A CLAIM IS CAUSED IN WHOLE OR IN
PART BY THE ORDINARY
NEGLIGENCE OR STRICT LIABILITY OF AN INDEMNIFIED PARTY BUT WILL NOT APPLY TO THE EXTENT A CLAIM IS
CAUSED BY THE
SOLE NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY.
16.
Default and Remedies.
As used in this Lease, the term “Event
of Default” shall mean any one of the following:
(a)
Tenant shall fail to pay any installment of Rent or any other obligation hereunder involving the payment
of money within FIVE (5)
business days of when due; provided that the first such failure during any consecutive TWELVE (12) month period
shall not be an Event
of Default if Tenant pays the amount due within FIVE (5) days after written notice from Landlord;
(b)
Tenant shall fail to comply with any term, provision or covenant of this Lease, other than as described
in subsection (a) above which
failure continues for THIRTY (30) days (or such longer period as reasonably required if such cure cannot
reasonably be completed within
such initial 30-day period) after written notice;
(c)
Tenant shall become insolvent or admit in writing it is unable to pay its debts as they become due, or
shall make a transfer of its property
that is fraudulent under any bankruptcy, fraudulent conveyance or similar law, or shall make an
assignment for the benefit of creditors;
(d)
Tenant takes any action to file a petition under any section or chapter of the United States Bankruptcy
Code, as amended from time to
time, or under any similar law or statute of the United States or any state thereof; or a petition shall
be filed against Tenant under any such
statute or Tenant notifies Landlord that it knows such a petition will be filed; or the appointment
of a receiver or trustee to take possession
of substantially all of Tenant’s assets located at the Premises or of Tenant’s assets located
at the Premises or of Tenant’s interest in this
Lease or the attachment, execution or other judicial service of substantially all of Tenant’s
assets located at the Premises or of Tenant’s
interest in this Lease, and such event (if involuntary) is not dismissed within NINETY (90)
days; or
(e)
Tenant shall do or permit to be done anything which creates a lien upon the Premises, except for the liens
placed on Tenant’s personal
property, furniture, fixtures or equipment, and such lien is not dismissed or bonded around within TWENTY
(20) days following Tenant’s
receipt of written notice from Landlord.
Page 15 of 26
16.1
Landlord Rights Upon an Event of Default. Upon the occurrence of an Event of Default, Landlord
may, at Landlord’s option, without
any notice or demand whatsoever (any such notice and demand being expressly waived by Tenant) in addition
to any other remedy or
right given hereunder or by law or equity, do any one or more of the following: (a) enter and take possession of
the Premises, after which
Landlord may relet the Premises on behalf of Tenant and receive the rent directly by reason of the reletting;
(b) enter the Premises and
perform Tenant’s obligations; (c) terminate this lease by written notice and sue for damages; or (d) terminate
the Tenant’s right of
possession and sue for rent. Landlord may enter and take possession of the Premises by self-help, by picking or
changing locks if
necessary, and may lock out Tenant or any other person who may be occupying the Premises, until the Event of Default
is cured, without
being liable for damages. Landlord shall use commercially reasonable efforts to relet or attempt to relet the Premises
or any part thereof
for such terms, for such rental and upon such other agreements and conditions as Landlord in its sole discretion may
deem advisable;
provided, however, upon each reletting, if any, all rentals actually received by Landlord from any such reletting shall
be applied, first, to
the payment of any sum other than rental due hereunder; second, to the payment of any cost and expense of reletting,
including brokerage
and attorney’s fees, the cost of removing, storing and disposing Tenant’s property or the property of any other person
found in the Leased
Premises and the cost of any remodeling, alterations and repairs; third, to the payment of any rental due and unpaid
hereunder; and
finally, the residue, if any, shall be held by Landlord and applied in payment of future rental as the same may become
due and payable
hereunder.
If an Event of Default
occurs, Tenant will be liable for:
(1)
if Landlord terminates this Lease, a sum of money equal to: (i) any unpaid Rent and other amounts accrued
hereunder to the date
of termination, including interest; and (ii) liquidated damages in an amount equal to (a) the total Rental that
Tenant would have
been required to pay for the remainder of the Lease Term following the date of termination discounted to present value
as of the
date of termination at the Prime Rate (defined below) minus (b) the then present fair rental value of the Premises for such
period,
similarly discounted; the “Prime Rate” is defined as the per annum interest rate publicly announced by a federally
insured bank
selected by Landlord in the state in which the Premises is located as such bank’s prime or base rate;
(2)
if Landlord terminates Tenant’s right of possession without terminating the Lease, (i) any unpaid
Rent and other amounts
accrued hereunder to the date of termination of possession; and (ii) all Rent and other sums required under this
Lease to be paid
by Tenant during the remainder of the Term, diminished by any net sums received by Landlord through reletting the Premises
during said period, and at Landlord’s option such amount shall be paid by Tenant to Landlord in monthly installments on the
first day
of each month of the Term;
(3)
Landlord’s commercially reasonable cost of reletting the leased premises, including market rate
brokerage fees, advertising fees,
and other fees reasonably and customarily necessary to relet the Premises;
(4)
any and all amounts expended by Landlord for the cost of performing any obligations of Tenant which Landlord
elects to
perform;
(5)
all Landlord’s actual out-of-pocket costs associated with eviction of Tenant, such as attorney’s
fees, court costs, and prejudgment
interest;
(6)
all Landlord’s actual out-of-pocket costs associated with collection of rent such as collection fees,
late charges, and returned
check charges;
(7)
cost of removing any of Tenant’s equipment or fixtures left on the leased Premises or Project;
Page 16 of 26
(8)
cost to remove any trash, debris, personal property, hazardous materials, or environmental contaminants
left by Tenant or
Tenant’s employees, patrons, guests, or invitees in the Premises or Project and which Tenant was obligated to
remove upon
expiration or earlier termination of the Lease;
(9)
cost to replace any unreturned keys or access devices to the Premises, parking areas, or Project; and
(10)
any other recovery to which Landlord may be entitled under this Lease or under law.
16.2
Landlord Default and Tenant Remedies. Subject to the terms and provisions hereinbelow, and
in addition to any other remedy
expressly available to Tenant pursuant to this Lease or at law or in equity, should Landlord fail to perform
any term or covenant under
this Lease or any other existing agreement between Landlord and Tenant, its parent company, subsidiaries or
affiliates (each and any such
failure being herein sometimes referred to as a “Landlord Default”) and if any such Landlord
Default shall not be cured and shall
accordingly be continuing THIRTY (30) days following written notice by Tenant to Landlord of such
Landlord Default (unless such
default is not reasonably capable of being cured within such THIRTY (30) day period then such longer time
as reasonable required
provided Landlord is diligently prosecuting such cure to completion), then Tenant shall have the option (at Tenant’s
sole discretion) of (i)
abating or withholding Rent, (ii) suing for damages, and/or (iii) remedying such Landlord Default and, in connection
therewith, incurring
expenses for the account of Landlord, and any and all such sums expended or obligations incurred by Tenant in connection
therewith
shall be paid by Landlord to Tenant upon demand. If Landlord fails to immediately reimburse and pay any amounts due to Tenant,
Tenant
may, in addition to any other right or remedy that Tenant may have under this Lease, deduct such amount from subsequent installments
of
Rent and other charges (if any) that from time to time thereafter may become due and payable by Tenant to Landlord hereunder.
Notwithstanding
the foregoing, in all events Tenant shall have the right to remedy any Landlord Default without prior notice in the event
of an emergency
(so long as Tenant gives notice within a reasonable period of time thereafter) and invoice Landlord and abate Rent (if
necessary) in the
manner set forth in the preceding sentences of this Section 16.2.
17.
Insurance.
a.
Landlord’s Insurance. During the Term of this Lease, Landlord shall procure and maintain
in full force and effect with respect to the
Project (i) an all-risk policy with extended coverage endorsements (including, to the extent
required, sprinkler leakage, vandalism and
malicious mischief coverage, and any other endorsements required by the holder of any fee or
leasehold mortgage and earthquake,
terrorism and flood insurance to the extent Landlord reasonably deems prudent and/or to the extent
required by any mortgagee) for full
replacement value; and (ii) a policy of commercial liability insurance in a minimum amount of [*****]
per claim and [*****] in the
aggregate for both bodily injury and property damage, limits can be satisfied through the maintenance of
a combination of primary and
umbrella policies, insuring Landlord’s activities, including use, maintenance, occupancy or ownership
with respect to the Premises and
common area for loss, damage or liability for personal injury or death of any person or loss or damage
to property occurring in, upon or
about the Premises or the common area.
b.
Tenant’s Insurance. Tenant covenants and agrees to keep Tenant Improvements (as defined in
Section 31 hereof) and Tenant’s contents in
the Premises insured for full replacement value against loss by fire and casualty,
under an all-risk policy with extended coverage
endorsements. In addition thereto, Tenant shall obtain and keep in force with respect
to the Premises comprehensive general liability
insurance in a minimum amount of [*****] per claim and [*****] in the aggregate for both
bodily injury and property damage. Such
policy shall name Landlord and Tenant as the insureds. In no event shall Tenant’s insurance
provide coverage or indemnity to Landlord
for any claim, loss, suit, action or other legal proceeding in which Landlord, its agents or
designees bear responsibility for the claim, loss,
suit, action or other legal proceeding. Rather, it is the intent of this section to
provide general liability coverage to Landlord when it is
made a party to a claim, loss, suit, action or other legal proceeding for which
it bears no responsibility. In the event that both Landlord
and Tenant bear responsibility for the claim, loss, suit, action or other
legal proceeding, then each party will look to their own insurance
for coverage. Tenant may carry any insurance required by this Lease
under a blanket policy or under a policy containing a self-insured
retention. Each policy shall provide that the insurer shall give to
Landlord TWENTY (20) days written notice prior to any cancellation of
the policy.
Page 17 of 26
18.
No Subrogation; Waiver of Property Claims. The waiver of subrogation shall apply regardless
of any deductible (or self-insured retention) or
self-insurance carried by either party. Landlord and Tenant each waive all rights
of recovery against the other (and any officers, directors,
partners, employees, agents and representatives of the other), and agree to
release the other from liability, for loss or damage to the extent
such loss or damage is covered by valid and collectible insurance in
effect covering the party seeking recovery at the time of such loss or
damage or would be covered by the insurance required to be maintained
under this Lease by the party seeking recovery, WHETHER OR
NOT SUCH DAMAGE OR LOSS MAY BE ATTRIBUTABLE TO THE NEGLIGENCE OF EITHER PARTY
OR THEIR OFFICERS,
DIRECTORS, PARTNERS, EMPLOYEES, AGENTS AND REPRESENTATIVES. If the release of either party, as set forth above,
should
contravene any law with respect to exculpatory agreements, the liability of the party in question shall be deemed not released
but shall be
secondary to the liability of the other’s insurer. FOR THE PURPOSE OF THE FOREGOING WAIVER, THE AMOUNT OF ANY
DEDUCTIBLE
OR SELF-INSURED RETENTION APPLICABLE TO ANY LOSS OR DAMAGE SHALL BE DEEMED COVERED
BY, AND RECOVERABLE BY THE INSURED UNDER THE INSURANCE
POLICY OR SELF-INSURANCE PROGRAM TO
WHICH SUCH DEDUCTIBLE RELATES. IT IS THE EXPRESS INTENT OF LANDLORD AND TENANT THAT THE WAIVER OF
SUBROGATION CONTAINED IN THIS SECTION 18 (I) WILL SURVIVE THE END OF THE TERM, (II) APPLY TO ALL
MATTERS DESCRIBED HEREIN, INCLUDING,
WITHOUT LIMITATION, ANY OF THE SAME THAT ARE CAUSED IN WHOLE
OR IN PART BY THE NEGLIGENCE OF LANDLORD OR TENANT (OR THEIR RESPECTIVE OFFICERS,
DIRECTORS,
PARTNERS, EMPLOYEES, AGENTS AND REPRESENTATIVES) BUT WILL NOT APPLY TO THE EXTENT A LOSS OR
DAMAGE IS CAUSED BY THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF THE RELEASED PERSON. Each party
shall cause its insurance carrier to endorse all applicable policies waiving
the carrier’s rights of recovery under subrogation or otherwise against
the other party. Tenant acknowledges that Landlord shall
not carry insurance on, and shall not be responsible for damage to, any property of
Tenant or its employees, clients or invitees located
in or about the Project.
19.
Repairs and Maintenance.
a.
Landlord’s Maintenance Responsibilities. Landlord shall timely maintain in good condition
and repair the common areas of the Project
and surrounding areas and such costs shall be considered CAM Charges in accordance with Section
8 of this Lease. Notwithstanding the
foregoing, Landlord, at its sole cost and expense, shall maintain and keep in good order and
repair and make any necessary repairs and
replacements to the roof, roof membrane, roof covering, concrete slab, footings, foundation,
structural components, exterior walls,
parking areas, exterior doors and windows, flooring (except for floor covering), exterior plumbing,
heating, ventilation, cooling and
electrical systems of the building and Premises (except as specifically set forth in Section 19(b) below)
including utility lines which are
concealed, or which are not located within or above the Premises. If Landlord shall not commence such
repairs within the FIFTEEN (15)
days following written notice from Tenant that such repairs are necessary then Tenant may, at its option,
cause such Landlord’s repairs to
be made and shall furnish Landlord with a statement of the cost of such repairs upon substantial
completion thereof. Landlord shall
reimburse Tenant for the cost of such repairs plus a service charge to cover Tenant’s expenses
in an amount equal to TEN PERCENT
(10%) of the cost of such repairs within TEN (10) days of the date of the statement from Tenant setting
forth the amount due, provided,
however, should Landlord fail to reimburse Tenant within said TEN (10) day period, then Tenant may, at
its option, offset such amount
against subsequent rent due under this Lease.
Page 18 of 26
b.
TENANT’S REPAIRS. Tenant shall keep the Premises in good, clean and habitable condition and shall
at its sole cost and expense keep
the Premises free of insects, rodents, vermin and other pests and make all needed repairs and replacements,
including replacement of
cracked or broken glass, except for repairs and replacements required to be made by Landlord under the provisions
of this Lease.
Notwithstanding the foregoing, it is understood that Tenant’s responsibilities herein include the repair and replacement
of all equipment
and nonstructural items located in, under and above the Premises and exclusively serving the Premises, including paint,
ceiling tiles, wall
and floor coverings, glass, doors, windows, lighting (bulbs, ballasts and fixtures), heating, air conditioning, plumbing,
sprinklers and
other electrical, mechanical and electromotive installation, equipment and fixtures, all utility repairs to ducts, conduits,
pipes and wiring,
and any sewer stoppage located in, or under the Premises. If any repairs required to be made by Tenant hereunder are
not made within
FIFTEEN (15) days after written notice delivered to Tenant by Landlord, Landlord may, at its option, make such repairs
without liability
to Tenant for any loss or damage which may result to its stock or business by reason of such repairs. Tenant shall pay
to Landlord within
THIRTY (30) days of demand, as additional Rent, the cost of such repairs. At the expiration of this Lease, all HVAC,
plumbing, electrical
and mechanical equipment and fixtures, excluding all freezers, washers, dryers, bulkheads and POS systems, shall
remain in the Premises
and become the property of Landlord (unless Landlord requests the items removal) and Tenant shall surrender the
Premises in good
condition, excepting reasonable wear and tear and damage by casualty.
20.
Brokers. Landlord and Tenant each represent to the other that it has had no dealings with
any real estate broker or agent in connection with the
negotiation of this Lease, except for CBRE, Inc., representing Tenant (“Tenant’s
Broker”) under separate agreement.
21.
Emergency. If Landlord is unable or unwilling to take action which it is obligated to take
hereunder where an emergency has occurred with
respect to the Premises, then Tenant may take such action as is reasonably necessary to
protect the Premises and persons or property in the
Premises and Landlord shall, within FIFTEEN (15) days after written notice thereof
from Tenant reimburse Tenant for its reasonable out-of-pocket
expenses incurred in curing such emergency; provided, however, should Landlord
fail to reimburse Tenant within said FIFTEEN (15) day period,
then Tenant may, at its option, offset such amount against subsequent rent
and other amounts due under this Lease.
22.
Common Areas and Parking.
a.
Common Areas. Landlord agrees that Landlord will not make any material modifications to the Project
or Premises (including, without
limitation, the parking areas, loading areas, driveways and walks but excluding any pad sites) without
Tenant’s prior written consent, such
consent not to be unreasonably withheld, conditioned or delayed.
b.
Parking. All parking (excluding any contained on pad sites) shall be for the common use of all
tenants at the Project and their respective
employees, agents, customers, representatives, and invitees. Notwithstanding the foregoing,
Landlord shall at all times throughout the
Term maintain the parking ratio as exists as of the date of this Lease excluding parking within
pad sites (i.e., a ratio of 4:1,000 rsf in the
Project) or such greater ratio as may be required by applicable law. No tenant or its employees,
agents, customers, representatives, and
invitees shall block aisles, doorways, stairwells, driveways, fire lanes, fire hydrants, loading
zones (except for authorized delivery
vehicles while loading/unloading) or other vehicles located in the parking areas of the Project.
Parking shall only be allowed in
designated and striped parking stalls. Tenant shall have the right at any and all times during the Term
to utilize that certain loading area
related to the Premises.
c.
Loading Zone. Tenant shall, at all times during the Term, have the right to use that certain loading
area related to the Premises and access
(via all drives and entrance/exit points) the rear of the Premises (including without limit such
loading area) with a semi-truck and 53-foot
trailer for shipments and deliveries.
Page 19 of 26
23.
Compliance with Laws. Both parties hereby agree to comply with all applicable federal, state
and local laws, codes, ordinances, rules and
regulations, including laws related to handicapped accessibility (including the Americans
with Disabilities Act) (collectively, “Laws”) throughout
the Term of the Lease. Landlord represents and warrants to
Tenant that as of the Commencement Date the Premises (including all means of
ingress/egress to and from the Premises and the installation
of sprinkler systems in the Premises if required by Laws), the Project, and the common
areas (including parking areas) are in compliance
with all Laws, including, without limitation, applicable zoning laws, ordinances, rules and
regulations and with applicable instruments
affecting title to the Premises; and Landlord shall be responsible for ensuring that the same are in
compliance with all applicable Laws
throughout the Term. Landlord further represents that it has received no notices or communications from any
public authority having jurisdiction
alleging violation of any Laws relating to the Premises or the Project or improvements thereon and has
received no notices alleging violation
of any title instrument. Without limiting the generality of the foregoing, Landlord represents that (i) the use
of the Premises and the
Project and improvements thereon for Tenant’s Permitted Use is permitted by and will not violate applicable Laws,
including without
limitation zoning laws, and does not constitute a “non-conforming use” thereunder and (ii) the Premises, the Project, and
the
common areas and parking areas comply with all applicable Laws relating to handicapped accessibility, including, without limitation,
the
Americans with Disabilities Act. If at any time or from time to time any Alterations, including, without limitation, structural Alterations,
are
required in order for the Premises or Project to comply with any generally applicable Laws from time to time applicable to the Premises,
Landlord
shall immediately make such Alterations at its sole cost and expense. If at any time or from time to time any Alterations, including,
without
limitation, structural Alterations, are required in order for the Premises to comply with any Laws specifically applicable to
the Premises due to
Tenant’s use for the Permitted Use and not due to any act by Landlord or another tenant, Tenant shall make such Alterations
at its sole cost and
expense.
24.
Tenant to Subordinate. Tenant shall, upon request of the holder of a mortgage or deed of
trust in the nature of a mortgage, which holder is a
commercial or institutional lender (“Mortgagee”) subordinate any
interest which it has by virtue of this Lease, and any extensions and renewals
thereof to any mortgages or deeds of trust placed upon
the Premises by Landlord, if and only if such Mortgagee shall execute, deliver and record
in the appropriate registry of deeds a recognition
and non-disturbance agreement in form and content substantially similar to Exhibit E attached
hereto and incorporated herein by
reference. Such Agreements shall provide by their terms that notwithstanding any foreclosure of such mortgage
or deeds of trust Tenant
may continue to occupy the Premises during the Term of this Lease or any extensions or renewals thereof under the same
terms, conditions
and provisions of this Lease unless Tenant shall be in default beyond any applicable grace periods provided for herein. Landlord
shall
use best efforts at or prior to the Commencement Date, to secure from Landlord’s present mortgagee of the Premises a non-disturbance
agreement in a form reasonably acceptable to Tenant. Landlord shall use best efforts to also secure from any future mortgagee or lienholders
of
Landlord non-disturbance agreements in a form reasonably acceptable to Tenant during the initial Term or any renewal periods, if exercised.
25.
Quiet Enjoyment. Subject to all of the terms and covenants of this Lease on Tenant’s
part to be kept, observed, and performed, Tenant shall
quietly have and enjoy the Premises during the Term of this Lease. Landlord agrees
that Tenant shall have continuous, peaceful, uninterrupted and
exclusive possession and quiet enjoyment of the Premises during the Term
of this Lease.
26.
Memorandum of Lease. Neither the lease nor a memorandum of lease shall be recorded or filed.
27.
Notices. All notices, demands and requests which may be or are required to be given by either
party to the other shall be in writing and shall be
either (i) sent by registered or certified mail, return receipt requested, postage
prepaid or (ii) delivered, by hand, or (iii) sent by overnight courier
such as Federal Express, to the addresses set forth in the Lease
Summary, or to any such other place as Landlord or Tenant may from time to time
designate in written notice to the other party. All notices,
demands and requests which shall be served upon Landlord and Tenant in the manner
aforesaid shall be deemed sufficiently served or given
for all purposes hereunder.
Page 20 of 26
28.
Estoppel Certificate. Each of Landlord and Tenant agrees at any time and from time to time
upon not less than TEN (10) days’ prior written
request by the other to execute, acknowledge and deliver to the other an estoppel
certificate in the form attached hereto as Exhibit F certifying that
(a) this Lease is unmodified and in full force and effect
(or if there have been modifications that the same is in full force and effect as modified
and stating the modifications), (b) the dates
to which the Rent and other charges have been paid, and (c) all of the defaults of Landlord or Tenant
hereunder, if any, (and if there
are no defaults a statement to that effect) and any other information reasonably requested, it being intended that any
such estoppel certificate
delivered pursuant to this Section 28 may be relied upon by any prospective purchaser of the Premises or any mortgagee
or assignee
of any mortgage upon the fee or leasehold of the Premises or by any prospective assignee of this Lease or subtenant of the whole or
any
portion of the Premises and/or by other party interested in the Premises or any part thereof.
29.
Holding Over. In the event Tenant remains in possession of the Premises after the expiration
of this Lease and without the execution of a new
Lease, Tenant shall be deemed to be occupying the Premises as a Tenant at will at a monthly
Base Rent equal to 150% of the monthly Base Rent
herein provided as the last month of the Term (or renewal Term then in effect) plus the
operating expenses and subject to all the conditions,
provisions and obligations of this Lease insofar as the same are applicable to a
tenancy at will. Nothing herein contained shall constitute consent to
any such holding over.
30.
Miscellaneous.
a.
Binding Effect. All covenants, agreements, stipulations, provisions, conditions and obligations
herein expressed and set forth shall extend
to, bind and inure to the benefit of, as the case may require, the successors and assigns
of Landlord and Tenant respectively, as fully as if
such words were written wherever reference to Landlord or Tenant occurs in this Lease.
b.
Complete Agreement. Any stipulations, representations, promises or agreements, oral or written,
made prior to or contemporaneously
with this agreement shall have no legal or equitable consequences and the only agreement made and binding
upon the parties with respect
to the leasing of the Premises is contained herein, and it is the complete and total integration of the
intent and understanding of Landlord
and Tenant with respect to the leasing of the Premises.
c.
Severability. If any term, covenant or condition of this Lease or the application thereof to any
person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Lease, or the application of such term,
covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term, covenant or
condition of this Lease shall be valid and be enforced to the fullest extent permitted by law.
d.
Applicable Law. The laws of the State where the Premises is located shall govern the validity,
performance and enforcement of this
Lease, without regard to such State’s conflict-of-law principles.
e.
Force Majeure. Whenever a day is appointed herein on which, or a period of time is appointed within
which, either party hereto is
required to do or complete any act, matter or thing, the time for the doing or completion thereof shall
be extended by a period of time
equal to the number of days on or during which such party is prevented from, or is interfered with, the
doing or completion of such act,
matter or thing because of strikes, lock-outs, embargoes, unavailability of labor or materials, wars,
insurrections, rebellions, civil
disorder, declaration of national emergencies, pandemics, change in technology which interferes with
Tenant’s Permitted Use, acts of
God, or other causes beyond such party’s reasonable control.
Page 21 of 26
f.
Amendment. This Lease and the exhibits attached hereto and forming a part hereof set forth all
the covenants, promises, agreements,
conditions and understandings between Landlord and Tenant concerning the Premises, and there are
no covenants, promises, agreements,
conditions or understandings, either oral or written, between them other than are herein set forth.
Except as herein otherwise provided, no
subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord
or Tenant unless reduced to writing
and signed by them.
g.
Rules and Regulations. Tenant shall comply with all reasonable rules and regulations of Landlord
in effect at the time of the execution of
this Lease (see Exhibit D), or at any time or times, and from time to time, promulgated
by Landlord which Landlord, in its reasonable
discretion, shall deem necessary in connection with the operation of the Project, provided
that all such rules and regulations shall be
applied uniformly to all tenants and occupants, and enforced uniformly by Landlord. If any
such rules and regulations conflict with the
terms of this Lease, the Lease terms shall control. No such rules and regulations shall prevent
Tenant from using the Premises for its
Permitted Use.
h.
Counterparts. This Lease may be executed in any number of counterparts via facsimile or electronic
transmission or otherwise, each of
which shall be deemed an original and all of which together shall constitute one and the same instrument.
31.
Tenant Improvements.
a.
Tenant shall construct its tenant improvements to the Premises (the “Tenant Improvements”)
in accordance with the terms set forth in
Exhibit G. Tenant Improvements shall include the following:
i.
Tenant shall accept the Premises “AS IS” and be responsible for the remodel of the interior
of the Premises;
ii.
Tenant shall maintain, repair and if necessary, replace HVAC units serving the Premises, if Tenant deems
replacement of any
such units to be necessary; and
iii.
If Tenant so elects, Tenant shall be permitted to install a canopy over the shipping/receiving area as
part of its Tenant
Improvements.
b.
Landlord shall complete all of Landlord’s Work, as described in Exhibit G attached hereto
and incorporated herein. All Landlord’s Work
shall be done in a good and workmanlike manner and in compliance with all applicable
laws, ordinances, building and safety codes,
regulations and orders of the federal, state, county, or other governmental authorities having
jurisdiction thereof. Without in any way
limiting any obligation of Landlord under the Lease, Landlord shall indemnify, defend and hold
harmless Tenant from and against claims,
damages, losses and expenses, including but not limited to attorneys’ fees, arising out
of or resulting from performance of the Landlord’s
Work.
32.
Landlord’s Sale of the Building. Landlord may, at any time, without the prior consent
of Tenant, contract to and/or perform any of the following
transactions with respect to an interest in Landlord, the Lease, the Premises,
the realty underlying the Premises, and/or any portion of or interest in
the realty or improvements owned or hereafter acquired by Landlord:
sale, purchase, exchange, transfer, assignment, lease, conveyance
(collectively referred to herein as “Sale”); and/or
encumbrance, pledge, mortgage, deed of trust, hypothecation or sale and leaseback transaction
(collectively referred to herein as “Mortgage”).
From and after a Sale, Landlord shall be released from all liability to Tenant and Tenant’s
successors and assigns arising from
this Lease because of any act, occurrence or omission of Landlord occurring after such Sale, and Tenant shall
look solely to Landlord’s
successor in connection with the same; provided however, that Landlord shall not be released from liability to Tenant
and Tenant’s
successors and assigns from this Lease because of any act, occurrence or omission of Landlord occurring prior to such Sale, unless
such
liability is expressly assumed by Landlord’s successor-in-interest in this Project and Premises.
Page 22 of 26
33.
Tenant’s Roof Rights. Provided that such work and use does not damage the roof, Tenant shall
have the right to place on the roof (i) a satellite
dish and run appropriate electrical cabling from the Premises to such satellite dish
and/or install cable service to the Premises, (ii) the mechanical
equipment required for Tenant’s freezer, and (iii) the HVAC system,
all at no additional fee. Landlord shall reasonably cooperate with Tenant’s
satellite or cable provider and contractors. Tenant
shall be liable for the repair of any damage to the roof caused by such installation or use.
34.
Cooperation with Tenant’s Licenses and Reporting Requirements. Landlord’s full
cooperation with applicable authorities in connection with
obtaining and renewing any Licenses, and any reporting requirements for the
operation of Tenant’s business is essential for Tenant’s continued
operation of its business. Therefore, Landlord agrees to
provide to Tenant, within FIFTEEN (15) days of Tenant’s request, execution of any
commercially reasonable documents reasonably required
for Tenant’s Permitted Use, including obtaining any Licenses.
35.
Confidential Information.
a.
Landlord acknowledges and agrees that from time to time during the Term, Landlord, its representatives
or assigns may be exposed to, or
have access to, sensitive personal information related to Tenant’s donors. To protect such personal
information, Tenant shall have the
right to restrict access to the portions of the Premises where donor records and other personal information
are kept or stored. Landlord
hereby agrees that, notwithstanding the rights granted to Landlord pursuant to Section 14 and under
this Lease, except when accompanied
by an authorized representative of Tenant, neither Landlord nor its employees, agents, representatives
or contractors shall be permitted to
enter those areas of the Premises designated by Tenant as locations where sensitive donor records
and other personal information are kept
and/or stored. Landlord agrees that it will not use or disclose any such personal information
for any purpose unless required by a court of
competent jurisdiction or a governmental authority.
b.
Landlord shall preserve any “Confidential Information” of or pertaining to Tenant and
shall not, without first obtaining Tenant’s prior
written consent, disclose to any person or organization, or use for its own benefit,
any Confidential Information of or pertaining to Tenant
during and after the Lease Term, unless such Confidential Information is required
to be disclosed by a court of competent jurisdiction or
by any governmental authority. As used herein, the term “Confidential
Information” shall mean any business, financial, personal or
technical information relating to the business or other activities
of Tenant that Landlord obtains in connection with this Lease. Any
business or financial information which is related to or supports the
Lease shall not be included in meaning of Confidential Information,
but shall be part of Section 37.
36.
Landlord’s Consent. Unless otherwise expressly stated herein, whenever Landlord’s
consent is required under this Lease, such consent shall not
be unreasonably withheld or delayed, and Landlord’s reasonable satisfaction
shall be sufficient for any matters under this Lease.
37.
Confidentiality. Both Landlord and Tenant acknowledge that the terms and conditions of this
Lease (other than the existence of this Lease and the
location of the Premises) are to remain confidential for both parties’ benefit,
and may not be disclosed by either party to anyone, by any manner or
means, directly or indirectly, without the other party’s prior
written consent; however, Landlord or Tenant may disclose the terms and conditions of
this Lease to its respective attorneys, accountants,
brokers, employees and existing or prospective financial partners and, as to Landlord, any
potential purchasers, or any other party assisting
Landlord in the sale or valuation of the Project, or if required by law or court order, provided all
parties to whom Landlord or Tenant
is permitted hereunder to disclose such terms and conditions are advised by Landlord or Tenant (as the case
may be) of the confidential
nature of such terms and conditions and agree to maintain the confidentiality thereof (in each case, prior to
disclosure). The disclosing
party shall be liable for any disclosures made in violation of this Section by the disclosing party or by any entity or
individual to
whom the terms of and conditions of this Lease were disclosed or made available by the disclosing party. The consent by either party
to any disclosures shall not be deemed to be a waiver on the part of such party of any prohibition against any future disclosure. Notwithstanding
anything to the contrary herein, Landlord and Tenant shall each have the right to make disclosures of the terms of this Lease (a) to the
extent
required by legal requirements, (b) to the extent reasonably required to enforce such party’s rights hereunder, (c) to the
extent reasonably
necessary in connection with such party’s financing, selling, leasing, or otherwise transferring or capitalizing
its assets or its business (or any such
transaction consummated by such party’s affiliate) (including, without limitation, disclosures
that are reasonably necessary to comply with rules of
the Securities and Exchange Commission or any stock exchange), (d) to the extent
reasonably required in connection with such party’s books and
records being audited, (e) to the extent reasonably required in constructing,
operating, maintaining, repairing or restoring the Premises or the other
portions of the Project, and (f) pursuant to a press release
which has been approved by both parties.
Page 23 of 26
38.
Right to Pledge. Notwithstanding anything to the contrary, Tenant shall have the right to
pledge any of Tenant’s property that is provided or
financed by a third-party lender or vendor holding a purchase money lien on
such property and Landlord agrees to promptly execute such
documents as may reasonably be requested from any such third-party lender or
vendor to evidence Landlord’s waiver of its lien rights in such
property.
39.
Landlord’s Representations. Landlord hereby represents and warrants to and covenants
with Tenant as follows:
a.
Landlord owns the Premises and the Project in fee simple absolute, free and clear of all encumbrances
except for those restrictions and
encumbrances of record which Landlord represents and warrants to Tenant shall not interfere with Tenant’s
Permitted Use or Tenant’s
right under this Lease. Landlord has the right and authority to enter into this Lease and Landlord and
those signatories executing this
Lease on behalf of Landlord have full power and authority to execute this Lease.
b.
There are no agreements between Landlord and other tenants or third parties that impact the operation
of the Project or govern the uses
within the Project or that would adversely impact Tenant’s use of the Premises for the Permitted Use
and common areas as set forth in
this Lease.
c.
There are no third parties (other than lender) that have any rights to the Premises and Landlord will
warrant unto Tenant and defend the
Premises and the Project against the claim of all persons whomsoever, and if Tenant shall discharge
the obligations herein set forth to be
performed by Tenant, Tenant shall, during the Term, have lawful, quiet and peaceful possession
and occupation of the Premises and the
other rights with regard to the Project contained in this Lease.
d.
Tenant’s use of the Premises for the Permitted Use will not violate any exclusive provision or prohibited
use restriction granted to any
other tenant or occupant in the Project.
e.
Landlord shall promptly forward to Tenant any notice or other communication received by Landlord from
any owner of property
adjoining or adjacent to the Project or from any municipal or other governmental authority or from any other party,
in connection with
any hearing or other administrative proceeding relating to any proposed zoning, building code, signage, or related
variance affecting the
Project or any adjoining or adjacent property, which, if granted, could affect Tenant’s use or occupancy
of the Premises, the conduct of
Tenant’s business therein, or Tenant’s rights and benefits under this Lease.
40.
Tenant Lease Conditions. Tenant’s obligations under this Lease shall be subject to
the final approval of Tenant’s executive committee, as well as
satisfaction, in Tenant’s sole discretion, of each of the following
conditions (the “Lease Conditions”):
a.
The zoning at the Project being compatible with Tenant’s Permitted Use and Tenant’s confirmation
that its Permitted Use will not violate
any such zoning or similar laws;
Page 24 of 26
b.
The current title for the Project, upon review of any recorded documents, restrictions, easements, covenants,
and any restrictions in any
other tenant leases that may impact the Premises, Tenant, or its Permitted Use; Landlord has provided Tenant
with a copy of Landlord’s
title policy for the Project, and upon request shall provide all tenant restrictions and recorded documents
affecting the Project, and a
description of any other agreements between Landlord or the Project any other parcels or landowners that
impact the operation of the
Project; and Tenant shall be permitted to obtain an updated title report for the Project for its review.
c.
Tenant is satisfied with the building, roof, parking areas, and common areas after an inspection.
d.
Tenant is satisfied with the environmental condition of the Premises and Project after an inspection.
Tenant shall use
commercially reasonable, diligent efforts to obtain such information as reasonably required to satisfy itself as to the
Lease Condition
within THIRTY (30) days following the Effective Date of this Lease (the “Lease Condition Deadline”). Landlord
agrees to fully
cooperate with Tenant in order to permit Tenant to obtain such information, documents, inspections and reports to timely
satisfy the Lease
Conditions. If Tenant determines, in its sole discretion, that any of the Lease Conditions are not satisfactory,
Tenant shall have the right to
terminate this Lease by giving written notice to Landlord within TEN (10) business days following the expiration
of the Lease Condition
Deadline, in which event this Lease shall terminate, and any prepaid Rent paid by Tenant to Landlord shall be promptly
returned to Tenant, and
neither party shall have any further rights or obligations pursuant to this Lease, except those matters that expressly
survive the termination of the
Lease. If Tenant fails to timely provide such notice of termination, then Tenant shall have waived
its termination right and the Lease Conditions
shall be deemed to have been satisfied or waived by Tenant. Tenant shall provide notice
of waiver of this termination right (the “Lease Condition
Waiver”).
[Signatures to follow]
Page 25 of 26
IN TESTIMONY
WHEREOF, Landlord and Tenant have caused this Lease to be executed as a sealed instrument, as of the day and year first above written.
Landlord, simultaneously or not later than five (5) business days after Tenant has executed and delivered this Lease to Landlord, shall
execute this Lease.
LANDLORD:
TCP LAS PALMAS PARTNERS, LTD.
By:
TCP Palmas, Inc., its general partner
Robert B. Neely, President
Date:
TENANT:
KAMADA PLASMA, LLC, a Delaware limited liability
company
By:
Date:
Page 26 of 26
EXHIBIT A
PREMISES
[*****]
Exhibit A – Page 1
EXHIBIT A-1
PROJECT DESCRIPTION
BEING a tract
of land containing 21.83 acres, or 950,720 Sq. Ft. of land out of a called 21.8188 acres as recorded in Volume 4855, Page 525 of the Real
Property Records of Bexar County, Texas, also being part of Lot 1, all of Lot 2 and Lot 4, Block 1, NCB 11250, in the Las Palmas Addition
Unit 2
Subdivision as recorded in Volume 3850, Page 101 and Volume 4400, Page 225 of the Deed and Plat Records of Bexar County, Texas,
in the City of San
Antonio, Bexar County, Texas, said 21.83 acres being more particularly described by metes and bounds as follows:
BEGINNING
at an “X” on concrete on the east right-of-way line of General McMullen Drive, a 100’ right-of-way, which joins the south
line of a 14 foot
alley as recorded in Volume 3850, Page 101 of the Deed and Plat Records of Bexar County, Texas, said point being the
northwest corner of the herein
described tract;
THENCE South
83° 53’ 03” East, a distance of 117.64 feet, along and with said alley to a PK nail for a point of curvature;
THENCE Along
a curve to the left, continuing along and with said alley, having a radius of 4368.66 feet, a central angle of 15° 08’ 01”,
a chord bearing
and distance of North 88° 32’ 52” East, 1150.54 feet, and a curve length of 1153.90 feet to a set ½”
iron rod with “ACES” cap being on the west right-of-
way line of Inca Drive, a 60 foot right-of-way for the northeast corner
of the herein described tract;
THENCE South
09° 24’ 46” East, a distance of 179.68 feet along and with the west line of said right-of-way to a found ½”
iron rod for a point of
curvature;
THENCE Along
a curve to the left, continuing along and with the west line of said right-of-way, having a radius of 1663.45 feet, a central angle of
05° 15’
27”, a chord bearing and distance of South 12° 02’ 30” East, 152.61 feet, and a curve length of
152.64 feet to a “X” on concrete for a point of tangency;
THENCE South
14° 40’ 15” East, a distance of 54.85 feet, continuing along and with the west line of said right-of-way, to a set ½”
iron rod with “ACES”
cap for the northeast corner of a 0.7016 acre tract as recorded in Volume 4499, Page 1580 of the Real Property
Records of Bexar County, Texas and a
corner of the herein described tract;
THENCE South
75° 19’ 45” West, a distance of 280.00 feet, departing the west line of said right-of-way for a found PK nail for the northwest
corner of
said 0.7016 acre tract and an interior corner of the herein described tract;
THENCE South
14° 40’ 15” East, a distance of 215.00 feet to a set ½” iron rod being on the north right-of-way line
of Castroville Road, a 60 foot right-of-
way, said point also being the southwest corner of said 0.7016 acre tract and the southeast corner
of the herein described tract;
THENCE South 75°
19’ 45” West, a distance of 945.74 feet, along and with the north right-of-way of said Castroville Road to a found
½” iron rod for the
southeast corner of Lot 5 as recorded in Volume 5700, Page 234 of the Real Property Records of
Bexar County, Texas and a corner of the herein described
tract;
THENCE North
06° 26’ 30” East, a distance of 175.00 feet, departing said right-of-way to a found PK nail for the northeast corner of
said Lot 5 and an
interior corner of the herein described tract;
THENCE South 75° 19’
45” West, a distance of 150.00 feet to a set ½” iron rod with “ACES” cap for the northwest corner of said
Lot 5 and an interior
corner of the herein described tract;
THENCE South 06° 26’
30” West, a distance of 175.00 feet to an “X” on concrete to a point being on the north right-of-way line
of said Castroville Road
for the southwest corner of said Lot 5 and a corner herein described tract;
THENCE South
75° 19’ 45” West, a distance of 140.00 feet, along and with said right-of-way to a found ½” iron rod being
a cutback line that joins the
north right-of-way line of said Castroville Road and the east right-of-way line of said General McMullen
Drive for the southwest corner of the herein
described tract;
THENCE North 40° 35’ 37’’
West, a distance of 51.86 feet to a set ½” iron rod with “ACES” cap being on the east right-of-way of said General
McMullen
Drive for an angle point of the herein described tract;
THENCE North 06° 26’ 30” East, a distance of
921.26 feet along and with the east right-of-way line of said General McMullen Drive to the POINT OF
BEGINNING and containing 21.83
acres, in the City of San Antonio, Bexar County, Texas.
Exhibit A-1 – Page 1
EXHIBIT B
SIGNAGE
[*****]
Signs for exterior of the building
above the Premises, entrance to the Premises signage, former Luby’s sign location, McMullin location, and a panel with
Tenant’s
name and/or logo pylon sign with location marked at the Project.
[*****]
Tenant shall
have right to utilize the channel lettering in a professional manner and is allowed to paint to match the building color.
[*****][*****]
Exhibit B – Page 1
EXHIBIT C
FORM OF COMMENCEMENT DATE MEMORANDUM
With respect to that certain
lease (“Lease”) dated ________________________, 2024 (“Landlord”) and KAMADA PLASMA, LLC (“Tenant”),
whereby Landlord leased to Tenant and Tenant leased from Landlord space located at (the “Premises”). Tenant
and Landlord hereby acknowledge as
follows:
(1)
Landlord delivered possession of the Premises to Tenant on ___________________ (the “Possession Date”);
(2)
The Term of the Lease commenced on _______________________ (the “Commencement Date”); and
(3)
Tenant shall commence payment of Rent on _________________________ (the “Rent Commencement Date”).
(4)
The Premises contain approximately 11,100 rentable square feet of space.
All capitalized terms herein, not otherwise defined
herein, shall have the meaning assigned in the Lease.
IN WITNESS WHEREOF, this Commencement
Date Memorandum is executed the date(s) set forth below.
Landlord
By:
Signature
Name/Title
Date:
TENANT:
KAMADA PLASMA, LLC, a Delaware limited liability
company
By:
Date:
Exhibit C – Page 1
EXHIBIT D
RULES AND REGULATIONS
The following Rules and Regulations, hereby accepted
by TENANT, are prescribed by LANDLORD to regulate conduct in and use of the Premises and the
Shopping Center:
1. TENANT,
its agents, representatives and employees shall not block or obstruct any of the entries, passageways, doors, sidewalks, or other
exterior
areas of the Shopping Center, or any parking areas, fire lanes, handicapped parking, reserved parking, or other tenant loading zones and
docks, or
place, empty or throw any rubbish, litter, trash or material of any nature into such areas, or permit such areas to be used
at any time except for ingress or
egress of TENANT, its agents, representatives, employees, visitors or invitees.
2. TENANT
shall assume all liability and risk associated with the movement of furniture, equipment, merchandise or materials within, into or out
of the Premises and/or Shopping Center. Safes and other unusually heavy equipment shall be moved into the Premises only with LANDLORD’s
prior
written consent.
3. No
sign, door plaque, advertisement or notice shall be displayed, painted or affixed by TENANT, its agents, representatives or employees
on
any part of the outside of the Premises or the Shopping Center (except signage specifically authorized by the Lease), or in the Common
Areas, without the
prior written consent of LANDLORD, and then only such color, size, character, style and material and in such places
as shall be approved and designated
in writing by LANDLORD.
4. LANDLORD
shall not be responsible for lost or stolen personal property, equipment, money or any article taken from the Premises or the
Common Areas
regardless of how or when any such loss occurs.
5. TENANT,
its agents, representatives and employees shall not bring into the Premises any flammable fluids (except ordinarily quantities of
cleaning
products and other reasonable items for the Tenant’s permitted use) or explosives of any type without the prior written consent of LANDLORD.
6. TENANT,
its agents, representatives or employees shall not use the Premises for housing, lodging or sleeping purposes without the prior written
consent of LANDLORD.
7. TENANT,
its agents, representatives or employees shall not bring or permit to be brought into the Premises or keep or allow to be kept thereon
any live animals of any kind.
8. No
locks shall be placed on any door in the Premises unless Tenant shall have first furnished LANDLORD two(2) keys to each such lock. Upon
request of LANDLORD, TENANT shall provide additional duplicate keys at TENANT’s expense. LANDLORD may at all times keep a passkey to the
Premises.
9. TENANT,
its agents, representatives and employees shall not permit the operation of any musical or sound producing instrument or any type of
instrument
or device which may be heard outside the Premises (except as expressly permitted by the Lease), or which may emanate electrical waves
which
will impair radio or television broadcasting or reception from or in the other tenant space in the Shopping Center, nor shall any
flashing, strobing, moving
or pulsating lights be used in any window display or area visible from the outside of the Premises.
10. TENANT,
its agents, representatives and employees shall, before leaving the Premises unattended, close and lock all doors and shut off all
running
water and other appliances. No cooking or food preparation of any kind shall be permitted in the Premises unless the Tenant’s permitted
use is a
restaurant use; provided, however, use of a microwave for Tenant and its employees is hereby permitted.
Exhibit D – Page 1
11. Within
ten(10) days after opening for business in the Premises, TENANT shall furnish LANDLORD, upon request by Landlord in writing, the
make,
model, color and state automobile license number (updating the same as changed) assigned to the cars of TENANT’s officers, employees and
regularly employed agents who shall be from time to time working at the Premises, and thereafter shall use commercially reasonable efforts
to notify
LANDLORD in writing of any changes thereof within thirty days after the request from LANDLORD.
12. TENANT
and its employees agents and representatives shall comply with posted traffic regulations, restrictions and signage from time to time
placed by Landlord in the parking areas of the Shopping Center, and shall not park in any area not striped as a parking space. No employee
of TENANT
shall keep a disabled vehicle in the parking areas of the Shopping Center for any period except for period of short duration
while arrangements for towing
are being made. In the event TENANT’S employees or customers park their cars in the parking areas in violation
of posted parking or traffic regulations,
then LANDLORD at its option shall have the right to tow such vehicle away at the Tenant’s cost
and expense. No overnight parking allowed.
13. The
plumbing facilities in the Premises shall not be used for any other purpose than that for which they are constructed, and no foreign
substance
of any kind shall be thrown therein, and the expense of any breakage, stoppage or damage resulting from a violation of this provision
by
TENANT or its employees, agents or invitees shall be borne by TENANT. To the extent any food service operation is contemplated by the
TENANT’s
Lease, TENANT shall obtain all necessary permits therefor, shall have and maintain all facilities (including, without limitation,
grease traps, sinks, vent
hoods, drains, fans, exhausts, fire extinguishers, smoke detectors, occupancy limitation signage, and similar
items) required by applicable laws, ordinances
and regulations, and shall at all times operate such facilities in compliance with applicable
law.
14. TENANT
shall not conduct canvassing, soliciting and peddling in the Shopping Center (including the attachment of flyers to vehicles in the
parking
areas).
15. In
the event LANDLORD elects to provide waste disposal for the Shopping Center as a common area maintenance expense for any portion of
the
Lease Term, and if TENANT must dispose of waste or refuse which will not fit into the dumpster receptacles or which are of a type not
accepted by the
waste company (including paint and all other hazardous waste material), it shall be the responsibility of TENANT to dispose
of such articles at its expense.
16. Neither
TENANT nor its employees, agents or representatives shall place or allow to be placed or maintained on or removed from the roof of
the
Premises any installation or thing of any nature or kind (including satellite dishes, signs, decorative items, advertising paraphernalia,
spare construction
materials and trash) except as set forth in the Lease.
17. TENANT
shall keep the sidewalk and area adjacent to and in the immediate vicinity of the Premises (including all loading areas) swept and
free
from trash, rubbish, garbage and other debris or refuse.
18. TENANT
shall keep in a neat, clean, safe and sanitary condition the area behind the Premises if such an area is designated by LANDLORD
for TENANT’s
use for loading and/or refuse collection.
19. TENANT
shall not overload the electrical equipment and systems, plumbing systems or HVAC systems or equipment serving the Premises,
and shall
be responsible for any damage to the Shopping Center equipment or mains resulting from such excessive use.
20. TENANT
shall not continue to allow upon the Premises any employee or agent who is known by TENANT to have a record of felony violent
crime or
felony property crime, or to pose a threat to the safety of others. Tenant shall not allow or tolerate illegal drug use or possession
by its employees
on the Premises.
21. TENANT
shall adopt, disseminate and enforce a policy for its employees at the Premises (excluding Tenant’s security) prohibiting the
possession
of firearms while at or on the property of the Premises and/or the Shopping Center. Tenant shall post proper signs (approved by Landlord
as to
appearance) prohibiting patrons of the Tenant from bringing firearms onto the Premises.
22. The
normal business operating hours of the Shopping Center are 9:00 a.m. to 10:00 p.m., Monday through Friday, 9:00 a.m. to 10:00 p.m.
Saturday,
and noon to 6:00 p.m. on Sunday, subject to change by Landlord on notice to the tenants; provided, however, Landlord acknowledges that
Tenant
may operate beyond normal business hours (e.g., 7:00 a.m. to 7:00 p.m. seven (7) days a week).
23. Sign
Criteria. These criteria have been established for the purpose of assuring an outstanding Shopping Center, and for the mutual benefit
of
all lessees. Conformance will be strictly enforced; and any installed nonconforming or unapproved sign must be brought into conformance
at the expense
of the Tenant. The signage set forth in Exhibit B is approved by Landlord notwithstanding anything contained in this Exhibit
D to the contrary.
Exhibit D – Page 2
A. GENERAL
REQUIREMENTS
1. Tenant
shall submit or cause to be submitted to the Project Architect, as designated by Landlord, for approval before fabrication at least three
(3) copies of detailed drawings indicating the location, size, layout, design and color of the proposed signs, including all lettering
and/or graphics.
2. All
permits for signs and their installation shall be obtained by the Tenant or his representative.
3. All
signs and design and/or review fees of the Project Architect shall be constructed, installed and paid at Tenant’s expense.
4. Tenant
shall be responsible for the fulfillment of all requirements of these criteria.
B. GENERAL
SPECIFICATIONS
1. No
animated, flashing, or audible signs will be permitted.
2. No
exposed lamps or tubing will be permitted.
3. All signs shall bear UL label, and their installation shall comply with all local building and electrical codes.
4. No exposed raceways, crossovers or conduit will be permitted.
5. All cabinets, conductors, transformers and other equipment shall be concealed.
6. Electrical service to all signs shall be on Tenant’s meter.
7. Painted lettering will not be permitted, except as specified pursuant to Section F(2) hereof.
C. LOCATION
OF SIGNS
1. Signs
on the exterior of the shopping center building shall be permitted only for those Tenants having exterior public entrances and as located
within the sign areas designated by the Project Architect.
2. Tenants
will be permitted to install one illuminated or non-illuminated sign on the storefront. The maximum projection of the sign from the face
of the storefront shall be six (6) inches or to the face of the adjacent neutral strip, whichever is greater.
3. No
signs perpendicular to the face of the building or storefront will be permitted.
D. DESIGN
REQUIREMENTS
1. All
Tenant storefront entrance/store identification designs shall be subject to the approval of the Project Architect. Imaginative designs
which
depart from traditional methods and placement will be encouraged.
2. Wording
of signs shall not include the product sold except as part of Tenant’s trade name or insignia.
3. Tenants
shall have identification signs designed in a manner compatible with and complementary to adjacent and facing storefronts and the
overall
design concept of the Shopping Center.
4. Tenants
are encouraged to have signs designed as an integral part of the storefront design and with letter size and location appropriately scaled
and proportioned to the overall storefront design. The design of all signs, including style and placement of lettering, size, color, materials
and method of
illumination, shall be subject to the approval of the Project Architect.
5. Signs
designed in the more traditional manner with the lettering applied to a background surface that is part of the storefront shall conform
to
the following requirements.
a. The
sign area shall not exceed five percent (5%) of the area of the storefront or twelve (12) square feet, whichever is larger and shall be
located at least thirty-six (36) inches from each lease line. Sign area will be measured by circumscribing a rectangle around the main
body of the sign.
b. The
overall length of the sign shall not exceed two-thirds (2/3) of the width of the storefront exposure between neutral strips.
c. The
maximum height for letters in the body of the signs is fourteen (14) inches. The maximum height for initial capitals is eighteen
(18)
inches.
Exhibit D – Page 3
6. Signs
shall be composed of individual or script lettering. Signs with background panels shall be designed in a manner compatible with the
storefront.
Sign boxes and cans will not be permitted.
7. All
storefronts including plexiglass signs shall be fabricated of material with matte finish.
8. Acrycap
retainers used at the perimeter of sign letter faces shall match in color and finish the face of the sides of the sign.
E. CONSTRUCTION
REQUIREMENTS
1. All
exterior signs, bolts, fasteners, and clips shall be of enameling iron with porcelain enamel finish, stainless, steel, aluminum, brass,
or bronze.
No black iron materials of any type will be permitted.
2. Interior
signs only may be fabricated of carbon bearing steel with painted finish.
3. All
exterior letters or signs exposed to the weather shall be mounted at lease three quarters of an inch (3/4☐) from the building wall
to permit
proper dirt and water drainage.
4. All
letters shall be fabricated using full-welded construction.
5. Location
of all openings for conduit and sleeves in sign installation shall be neatly sealed in a watertight condition.
6. No
labels will be permitted on the exposed surface of signs except those required by local ordinance which shall be applied in an inconspicuous
location.
7. Sign
contractor shall repair any damage to any work caused by his work.
8. Tenant
shall be fully responsible for the operations of Tenant’s sign contractor.
F. MISCELLANEOUS
REQUIREMENTS
1. Tenant
will be permitted to place upon each entrance of its premises not more than one hundred forty-four (144) square inches of gold leaf or
decal application letter not to exceed two inches (2”) high block letters, the Tenant’s name and address. Where more than one Tenant
used the same door,
each name and address shall be applied. Color of letter will be as selected by Project Architect.
2. If
Tenant has a non-customer door for receiving merchandise, it may have uniformly applied on said door in a location as directed by the
Project
Architect in two inch (2”) high block letters, the Tenant’s name and address. Where more than one Tenant used the same door,
each name and address shall
be applied. Color of letters will be as selected by the Project Architect.
3. Tenant
may install on the mall front, if required by the U.S. Post Office, the numbers only for the street address in exact location stipulated
by
the Project Architect.
4. Except
as provided herein, no advertising placards, credit card decals, temporary or permanent signs, banners, pennants, names, insignia,
trademarks,
or other descriptive material shall be affixed or maintained upon the glass panes and supports of the show windows and doors, or upon
the
exterior walls of the building or storefront.
NOTE: THE SIGN MUST BE IN PLACE NO LATER THAN
60 DAYS FROM THE DATE LEASE AGREEMENT IS EXECUTED.
Exhibit D – Page 4
EXHIBIT E
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT
AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE
AND ATTORNMENT AGREEMENT (this “Agreement”) is made by and between
________________________________ (“Lender”),
______________ (“Landlord”), and KAMADA Plasma, LLC (“Tenant”), to be effective as of
____________________.
Introductory Provisions
The following Introductory
Provisions are a part of and constitute the basis for this Agreement:
A.
Landlord and Tenant are parties to that
certain Lease Agreement dated as of ________________ as described on Exhibit “A”
attached
hereto (the “Lease Agreement”) covering all or a part
of the real property (the “Property”) located in __________, that is more
particularly described on Exhibit “A” attached hereto.
The Lease Agreement
as it may from time to time be renewed, extended, amended, or supplanted is referred to in this
Agreement as the “Lease”.
B.
Landlord is requesting that Lender make a loan (or Lender has made a loan to Landlord) (the “Loan”),
which will be (or is) evidenced by
a promissory note (the “Note”), governed by a Loan Agreement (the “Loan
Agreement”), and secured by, among other things (i) a Deed
of Trust, Security Agreement and Financing Statement (the “Deed
of Trust”) on the Property and (ii) an Assignment of Rents (the
“Assignment”).
C.
The Note, the Deed of Trust, the Assignment, the Loan Agreement and all other documents executed
in connection with, as evidence of
or as security for the Loan are referred to in this Agreement as the “Loan Documents.”
D.
All liens, rights, security interests, and assignments (whether absolute or as collateral) (collectively,
the “Liens”), created, granted or
made by the Loan Documents are or will be valid liens, rights, security interests
and assignments.
E.
Lender, Landlord and Tenant consider this Agreement to be in their mutual best interests in connection
with the Lease.
F.
Lender would not make the Loan to Landlord but for the execution of this Agreement by Tenant.
NOW, THEREFORE, in consideration
of the premises, the covenants, conditions, provisions and agreements set forth in this Agreement, and
other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Lender, Landlord and Tenant hereby represent,
acknowledge, covenant and
agree as follows:
1.
The Lease. Both Landlord and Tenant covenant and represent to Lender and to each other that (i)
as of the effective date of this Agreement, the
Lease is in good standing, and in full force and effect, (ii) as of the effective date
of this Agreement, the Lease is in good standing, there are no
supplements, modifications, or amendments to the lease except as described
in Exhibit “B”, (iii) the Lease will not be amended further without
the prior written approval of Lender, except
as expressly permitted under the Lease or unless otherwise provided in the Loan Documents, (iv) the
Lease will not be terminated or cancelled
except as expressly provided in the Lease, (v) Tenant has not and will not make any prepayment of rent
under the Lease more than one month
in advance, and (vi) as of the effective date of this Agreement, there are no offsets, defenses, counterclaims,
or credits against the
rentals due or becoming due under the Lease.
Exhibit E – Page 1
2.
Subordination. Tenant subordinates the Lease and any lease hereafter executed by Tenant covering
any part of the Property at all times and in all
respects to the Loan, the Liens, the Loan Documents, and to all refinancings, increases,
renewals, modifications, consolidations, replacements,
and extensions thereof. The Lease is and will at all times continue to be subject
and subordinate in all respects to the Loan, the Liens, and the
Loan Documents and to all renewals, modifications, and extensions thereof,
but both Lender and Tenant agree that subject to the terms of
Paragraphs 3 and 4 below, any foreclosure of the Liens will not terminate
the Lease.
3.
Non-Disturbance. So long as Tenant is not in default (beyond any period(s) given under the Lease
to Tenant to cure such default) in (i) the
payment of any monetary obligation under the Lease or (ii) the performance of any of the other
terms, covenants, or conditions with which Tenant
is obligated to comply pursuant to the Lease, Tenant’s possession under the Lease
and Tenant’s rights and privileges under it shall not be
diminished or interfered with by Lender, and accordingly, Tenant’s
occupancy will not be disturbed by Lender during the term of the Lease,
except in accordance with the terms of the Lease.
4.
Recognition and Attornment. If Lender succeeds to the interest of Landlord in the Property or under
the Lease, the Lease and all terms in it, and
the rights of Tenant under the Lease, will continue in full force and effect and will not
be altered, terminated, or disturbed, and Tenant shall be
bound to Lender under all of the terms, covenants, and conditions of the Lease
for the balance of the lease term with the same force and effect as
if Lender were the landlord under the Lease. In such event, Tenant
shall attorn to Lender as its landlord, such attornment to be effective and self-
operative without the execution of any other instruments
on the part of Lender or Tenant, immediately upon Lender succeeding to the interest of
Landlord under the Lease. Provided, however, subject
to Paragraph 6 below, Tenant is under no obligation to pay Lender any monetary obligation
set forth in the Lease until Tenant receives
written notice from Lender that (a) Lender has succeeded to the interest of Landlord in the Property or
under the Lease, or (b) Lender
has posted the Property for foreclosure with such notice being sent to Tenant postage prepaid, certified mail, return
receipt requested
at Tenant’s address as shown in the Lease. Upon receipt by Tenant of such notice from Lender, Tenant shall make all payments
of
monetary obligations due by Tenant under the Lease to Lender or as Lender may in writing direct. The respective rights and obligations
of
Tenant and Lender upon such attornment, to the extent of the then remaining balance of the lease term shall be and are the same as
are then in
existence between Tenant and Landlord as set forth in the Lease. Tenant shall be entitled to rely on any such notice without
duty of inquiry or
investigation, and Landlord shall have no claim against Tenant for any amounts paid to Lender pursuant to any such
notice.
5.
Rights Under the Lease. If Lender (a) succeeds to the interests of Landlord in the Property, or
(b) enters into possession of the Property, Lender
shall be bound to the Tenant under all of the terms, covenants, and conditions of the
Lease, and Tenant shall, from and after Lender’s succession
to the interests of Landlord in the Property or entry into possession
of the Property, as the case may be, have the same remedies against Lender as
landlord for the breach of any provision contained in the
Lease that Tenant might have had under the Lease against Landlord if Lender had not
succeeded to the interests of Landlord in the Property
or entered into possession of the Property, as the case may be; provided further, however,
that Lender will not be:
(i)
liable for any act, omission, default, misrepresentation, or breach of warranty of any prior landlord
(including, but not limited to,
Landlord), unless such act, omission, or default is continuing and Tenant shall have delivered notice
of such act, omission or default to
Lender prior to the date of any foreclosure of such Lien;
(ii)
subject to any offset, deduction, or defense, claim, or counterclaim which Tenant might be entitled to
assert against any prior landlord
(including, but not limited to, Landlord) unless Tenant shall have provided Lender with (A) Notice of
the Landlord’s default that gave rise
to such offset or defense and (B) the opportunity to cure the same;
(iii)
liable to Tenant for any deposit under the Lease not actually transferred and paid over to Lender;
Exhibit E – Page 2
(iv)
obligated to give Tenant a credit for and/or acknowledge any rent or additional rent which Tenant has
paid to Landlord or any prior
landlord which is in excess of the rent or additional rent due under the Lease unless such payment is (A)
provided for in the Lease as
presently existing or as amended in accordance with this Agreement or (B) a prepayment of rent not in excess
of one month;
(v)
bound by any amendment or modification of the Lease made after the date of this Agreement without Lender’s
approval;
(vi)
bound by any consent or acquiescence by any previous landlord (including but not limited to Landlord)
under the Lease to any
assignment or sublease granted after the date of this Agreement, without Lender’s approval, other than if
pursuant to the provisions of the
Lease;
(vii)
liable for or obligated to pay for repairs, replacements, damages, new construction or allowances not
made, performed or paid by
Landlord if such performance or payment was due prior to Lender’s actual ownership of the Property;
(viii)
liable for the payment of any leasing commissions, the triggering event for which arose or occurred prior
to Lender’s actual ownership of
the Property; or
(ix)
liable or bound by any right of first refusal or option to purchase all or any portion of the Property.
Additionally, in
the event of Lender’s (a) succession to Landlord’s interests in the Property or (b) entry into possession of the Property:
(1) Lender shall have no obligation, nor incur any liability, beyond Lender’s then equity interest, if any, in the Property and
Tenant shall look
exclusively to such equity interest of Lender, if any, for the payment and discharge of any obligations imposed upon
Lender hereunder or under
the Lease or for recovery of any judgment from Lender, and in no event shall Lender or any of its respective
officers, directors, shareholders,
agents, representatives, servants, employees or partners, ever be personally liable for any such judgment
or obligations; and (2) Tenant shall be
bound to Lender under all of the terms, covenants, and conditions of the Lease, and Lender shall,
from and after Lender’s succession to the interest
of Landlord in the Property or entry into possession of the Property, as the
case may be, have the same rights and remedies against Tenant for the
breach of any provision contained in the Lease that Landlord might
have had under the Lease against Tenant if Lender had not succeeded to the
interests of Landlord in the Property or entered into possession
of the Property, as the case may be.
Exhibit E – Page 3
6.
Assignment of Rents. Pursuant to the Assignment, Lender has obtained a security interest in the
payments to be made by Tenant to Landlord under
the Lease, including base rental, operating expense reimbursements, and lease termination
payments. Tenant consents to Lender delivering written
notices with respect to the Assignment or Lender’s security interest thereunder
to the address and in the manner as provided in Paragraph 9 below.
If Lender elects to exercise its right to collect payments under the
Lease from Tenant directly pursuant to Lender’s interests under the Assignment,
Lender shall provide written notice thereof to Tenant,
and Tenant shall make all payments under the Lease thereafter to Lender as instructed in
such notice; provided, however, that if any payment
becomes due under the Lease prior to the TENTH (10th) day after the date Tenant receives
such notice, Tenant will not be obligated
to make such payment until the tenth (10th) day after Tenant receives the notice. Tenant’s obligation to
make lease payments to Lender
will not be subject to any claims or defenses against the payment of amounts due under the Lease except to the
extent such claims or defenses
would be applicable to Lender following Lender succeeding to the interests of Landlord under the Lease or entering
into possession of
the Property under Paragraph 5 above. Tenant acknowledges that Lender is not obligated to assume, perform, or discharge nor
does Lender
undertake to assume, perform, or discharge any obligation, duty, or liability of Landlord under the Lease, it being agreed that Lender
will be treated and agreeing to assume, perform, or discharge such obligations, duties, or liabilities only if (i) Lender, by written
notice to Tenant,
specifically elects to do so, or (ii) Lender forecloses and takes possession of the Property, in which event Lender’s
duties and liabilities with
respect to the Lease will be limited by the terms and conditions of this Agreement.
7.
Persons Other Than Lender. The recognition, nondisturbance, and other covenants made in this Agreement
by Lender for the benefit of Tenant
will be binding upon any person other than Lender who may acquire the interest of Landlord in the
Property and/or the Lease as a result of
foreclosure of the Liens or any other proceeding(s) to enforce the rights of Lender or any sale,
assignment, or transfer of the Property and/or the
Lease after Lender has acquired the interest of Landlord in the Property and/or the
Lease.
8.
Landlord’s Default. Tenant shall furnish Lender copies of all notices which Landlord is entitled
to receive under the Lease, notify Lender of any
default by Landlord under the Lease (which notice may be sent to Lender simultaneously
with any notice to Landlord), and permit Lender the
applicable time period granted to Landlord under the Lease to cure such default, or
if no time period stated in the Lease, then such time as
reasonably necessary to cure the default, prior to proceeding to exercise any
of the rights or remedies of Tenant under the Lease, including
termination of the Lease, abatement of rental payments due under it, or
performance of Landlord’s covenants or obligations which Tenant asserts
to be in default.
9.
Notices. All notices between Lender and Tenant under
this Agreement or the Assignment shall be given to the addressee at the following address:
if to Lender: ___________________________________;
if to Landlord: _____________________________; if to Tenant: 2 Holzman St,
Science Park, PO Box 4081, Rehovot 7670402, Israel, Attn: Legal Dept.
All notices given under this Agreement must be in writing and will be
considered properly given if mailed by first-class United States
mail, postage prepaid, registered or certified with return receipt requested, or by
delivering same in person to the addressee, or by
prepaid telegram. Any mailed notice will be effective upon deposit in the care and custody of the
U.S. Postal Service; notice given in
any other manner will be effective upon receipt at the address of the addressee. Either party may change its
address for purposes of
receiving notice under this Agreement upon not less than FIFTEEN (15) days’ notice given in the manner prescribed in
this Agreement.
Tenant will be entitled to rely upon any notice from Lender under this Agreement as to the matters stated in and covered by the
notice.
10.
Entire Agreement. This Agreement contains the sole and entire agreement and understanding between
the parties with respect to the subject matter
described in it and supersedes any and all other oral or written agreements between the
parties with respect to it. This Agreement may be executed
in multiple counterparts which together shall constitute one document.
[Signature page follows]
Exhibit E – Page 4
IN WITNESS WHEREOF, the parties
have caused this Subordination, Nondisturbance, and Attornment Agreement to be signed on the respective
dates of their acknowledgements,
but this Agreement is made to be effective on the date first set forth above.
LENDER:
By:
Date:
STATE OF TEXAS
§
COUNTY OF BEXAR
§
This
instrument
was
acknowledged
before
me
on
this
_____
day
of
_______,
20__
by
______________________
as_____________________________________ of _____________________________,
on behalf of said Company.
Notary Public in and for the State of Texas
Exhibit E – Page 5
.
LANDLORD:
Landlord
By:
Signature
Name/Title
Date:
STATE OF TEXAS
§
COUNTY OF BEXAR
§
This instrument was acknowledged before me
on this _____ day of ____________, 20__ by _________________, on behalf of said company.
Notary Public in and for the State of Texas
Exhibit E – Page 6
TENANT:
KAMADA PLASMA, LLC, a Delaware limited liability
company
By:
Date:
STATE OF TEXAS
§
COUNTY OF _______________
§
This instrument was acknowledged before me on
the _____ day of ________, 20__ by __________________, the ___________________ of
KAMADA PLASMA, a Delaware corporation, on behalf of
such corporation.
Notary Public in and for the State of Texas
AFTER RECORDING RETURN TO:
Exhibit E – Page 7
EXHIBIT “A”
(Property Description)
Exhibit E – Page 8
EXHIBIT “B”
(Description of Lease)
Exhibit E – Page 9
EXHIBIT F
FORM OF ESTOPPEL CERTIFICATE
THIS ESTOPPEL
CERTIFICATE is made as of the ____ day of ______, 20___ by KAMADA PLASMA, LLC (“Tenant”) in connection with that
certain
Lease Agreement dated ______ by and between Tenant and ______________, as Landlord (the “Lease”) for the premises
located at
________________ (the “Premises”).
Tenant hereby certifies to
____________ as follows:
1.
A true and correct description of the Lease together with all amendments is attached hereto as Exhibit
“A”. There are no other oral or
written agreements or understandings between Landlord and Tenant relating to the Premises.
2.
The information set forth below is true and correct as of the date hereof:
(a)
Approximate square footage of the Premises: ______ rentable square feet
(b)
Monthly installment of Rent (Base Rent and Tenant’s Proportionate Share of Operating Expenses) as
of the date hereof:
$________
(c)
Commencement Date: _____________
(d)
Rent Commencement Date: ____________
(e)
Expiration Date: ______________
(f)
Security Deposit: _________
(g)
Date through which Rent has been paid: _______________
(h)
Renewal Options: _________________
3.
Tenant has accepted possession of the Premises and is in occupancy thereof under the Lease. As of the
date hereof, the Lease is in full
force and effect.
4.
To the best of Tenant’s actual knowledge and belief, without inquiry or investigation, there exists
no default, no facts or circumstances
exist that, with the passage of time or giving of notice, will or could constitute a default, event
of default, or breach on the part of either
Tenant or Landlord.
5.
No rent has been or will be paid more than thirty (30) days in advance.
6.
Tenant has no right of first refusal, option, or other right to purchase the Project or any part thereof,
including, without limitation, the
Premises.
IN WITNESS WHEREOF, Tenant
has executed this Estoppel Certificate as of the date first above written.
TENANT:
KAMADA PLASMA, LLC, a Delaware limited liability
company
By:
Date:
Exhibit F – Page 1
EXHIBIT A TO ESTOPPEL CERTIFICATE
DESCRIPTION OF LEASE AND AMENDMENTS
1.
[insert description of Lease and amendments]
Exhibit F – Page 2
EXHIBIT G
WORK LETTER
(attached)
Exhibit G – Page 1
EXHIBIT G-1
LANDLORD’S WORK
Landlord shall be responsible for the following
work:
o
Repair damage to the header on the exterior of the facility at the dock.
o
Connect rain gutter that is disconnected at the rear dock
o
Paint bollards at rear of facility and repair or replace one in front of facility
o
Replace broken window at front and right side of building
o
Awnings to be put in good condition either cleaned, removed or replaced
o
Treat weeds behind building
o
Cracks in the building to be inspected by a structural engineer and repaired as needed.
o
Paint stucco and block surfaces
Exhibit G – Page 2
EXHIBIT G-2
TENANT FINISH-WORK:
ALLOWANCE
(Tenant
Performs the Work)
1.
Acceptance of Premises. Except as set forth in the Lease and this Exhibit, Tenant accepts
the Premises in their “AS-IS” condition on the
Possession Date. Landlord shall be responsible at its sole cost and
expense for completing, at Landlord’s expense, the following (collectively
“Landlord’s Work”):
Landlord is responsible for all code
compliance (including but not limited to ADA) for a) the common areas, and b) ingress/egress to the Premises.
Landlord is also responsible
for the following:
i.
Landlord will provide Landlord’s Work (as described above).
Except for the above,
Tenant shall accept the Premises “AS IS” and be responsible for the remodel of the interior of the Premises.
HVAC Replacement. Part of Tenant’s
Work, if deemed necessary by Tenant.
Storefront Replacement. AS IS
Utilities. AS IS
Landlord’s
Work shall be performed in a good and workmanlike manger and in accordance with all applicable Laws. Landlord shall
complete Landlord’s
Work in the interior on or before and on the exterior on or before July 31, 2024 (the “Landlord Completion Deadline”).
Landlord’s failure to complete the Landlord’s Work by such Landlord Completion Deadline shall be an event of default hereunder
and Tenant shall
have all remedies available to it under the Lease.
2.
Space Plans.
2.1
Preparation and Delivery. Tenant shall deliver to Landlord a space plan prepared by Tenant’s
design consultant (the “Architect“)
depicting improvements to be installed in the Premises (the “Space
Plans“) within ninety (90) days after the Effective Date.
2.2
Approval Process. Landlord shall notify Tenant whether it approves of the submitted Space
Plans within FIVE (5) business days after
Tenant’s submission thereof. If Landlord disapproves of such Space Plans, then Landlord
shall notify Tenant thereof specifying in
reasonable detail the reasons for such disapproval, in which case Tenant shall, within THREE
(3) business days after such notice, revise
such Space Plans in accordance with Landlord’s objections and submit to Landlord for
its review and approval. Landlord shall notify
Tenant in writing whether it approves of the resubmitted Space Plans within THREE (3) business
days after its receipt thereof. This
process shall be repeated until the Space Plans have been finally approved by Landlord and Tenant.
If Landlord fails to notify Tenant that
it disapproves of the initial Space Plans within FIVE (5) business days (or, in the case of resubmitted
Space Plans, within THREE (3)
business days) after the submission thereof, then Landlord shall be deemed to have approved the Space Plans
in question. Landlord’s
approval of the Space Plans shall not be unreasonably withheld, conditioned or delayed; and Landlord’s
approval rights shall be limited
to the improvements that impact the building’s structure or MEP systems or are visible from the
exterior of the Premises.
Exhibit G – Page 3
3.
Working Drawings.
3.1
Preparation and Delivery. After the Space Plans are approved (or deemed approved) by Landlord
and Tenant, Tenant shall provide to
Landlord for its approval final working drawings, prepared by the Architect, of all improvements that
Tenant proposes to install in the
Premises; such working drawings shall include the partition layout, ceiling plan, electrical outlets
and switches, telephone outlets,
drawings for any modifications to the mechanical, electrical, life safety and plumbing and any other
systems of the building, and detailed
plans and specifications for the construction of the improvements called for under this Exhibit
in accordance with all applicable Laws and
suitable for permitting and construction.
3.2
Approval Process. Landlord shall notify Tenant whether it approves of the submitted working
drawings within TEN (10) business days
after Tenant’s submission thereof. If Landlord disapproves of such working drawings, then
Landlord shall notify Tenant thereof
specifying in reasonable detail the reasons for such disapproval, in which case Tenant shall revise
such working drawings in accordance
with Landlord’s objections and submit the revised working drawings to Landlord for its review
and approval. Landlord shall notify
Tenant in writing whether it approves of the resubmitted working drawings within FIVE (5) business
days after its receipt thereof. This
process shall be repeated until the working drawings have been finally approved by Tenant and Landlord.
If Landlord fails to notify
Tenant that it disapproves of the initial working drawings within TEN (10) business days (or, in the case
of resubmitted working
drawings, within FIVE (5) business days) after the submission thereof, then Landlord shall be deemed to have approved
the working
drawings in question. Landlord’s approval of the working drawings shall not be unreasonably withheld, conditioned or
delayed; and
Landlord’s approval rights shall be limited to the improvements that impact the building’s structure or MEP systems
or are visible from
the exterior of the Premises.
3.3
Landlord’s Approval; Performance of Work. Landlord’s approval of such working
drawings shall not be unreasonably withheld,
provided that (a) they comply with all Laws, (b) the improvements depicted thereon do not
(1) adversely affect (in the reasonable
discretion of Landlord) the Building Systems or structure of the building (including the Project’s
restrooms or mechanical rooms), or (2)
affect (in the reasonable discretion of Landlord) (A) the exterior appearance of the Project, (B)
the appearance of the Project’s common
areas, or (C) the provision of services to other occupants of the Project, and (c) such working
drawings are sufficiently detailed to allow
construction of the improvements and associated work in a good and workmanlike manner. As
used herein, “Working Drawings“ means
the final working drawings approved by Landlord, as amended from time
to time by any approved changes thereto, and “Work“ or
“Tenant Improvements” means
all improvements to be constructed in accordance with and as indicated on the Working Drawings,
together with any work required by governmental
authorities to be made to other areas of the Project as a result of the improvements
indicated by the Working Drawings. Landlord’s
approval of the Working Drawings shall not be a representation or warranty of Landlord
that such drawings are adequate for any use or
comply with any Law, but shall merely be the consent of Landlord thereto. Landlord shall,
at Tenant’s request, sign the Working
Drawings to evidence its review and approval thereof. After the Working Drawings have been
approved, Tenant shall cause the Work to be
performed in accordance with the Working Drawings. LANDLORD MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SPACE PLANS,
THE WORKING DRAWINGS OR
THE WORK (OR ANY OTHER SERVICES PROVIDED BY THE ARCHITECT, TENANT’S CONTRACTOR OR ANY OF
THEIR SUBCONTRACTORS).
ALL IMPLIED WARRANTIES BY LANDLORD WITH RESPECT THERETO, INCLUDING
BUT NOT LIMITED TO THOSE OF HABITABILITY, MERCHANTABILITY, MARKETABILITY,
QUALITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY NEGATED AND WAIVED. WITHOUT LIMITING THE
FOREGOING, LANDLORD SHALL NOT BE
RESPONSIBLE FOR ANY FAILURE OF THE WORK. LANDLORD WILL
NOT BE RESPONSIBLE FOR, OR HAVE CONTROL OR CHARGE OVER, THE ACTS OR OMISSIONS OF
THE
ARCHITECT OR ITS AGENTS OR EMPLOYEES. LANDLORD IS NOT ACTING AS A CONTRACTOR AND IS NOT
GUARANTEEING THE SPACE PLANS, THE WORKING
DRAWINGS OR THE WORK, TENANT’S SOLE RECOURSE
WITH RESPECT THERETO BEING THE PURSUIT OF TENANT’S REMEDIES UNDER THE WARRANTIES
CONTAINED IN TENANT’S CONSTRUCTION CONTRACT OR IN TENANT’S ARCHITECT’S AGREEMENT. Upon
written approval of the Working
Drawings from Landlord, Tenant will submit such approved plans to the City within five (5) business
days.
Exhibit G – Page 4
4.
Change Orders. Tenant may initiate changes in the Work. To the extent such change affects
the building structure or systems, or is visible from
the exterior of the Premises, such change must receive the prior written approval
of Landlord, such approval not to be unreasonably withheld,
conditioned or delayed.
5.
Definitions. As used herein “Substantial Completion”, “Substantially
Completed”, and any derivations thereof mean the Work in the Premises
is substantially completed (as reasonably determined
by Tenant) in accordance with the Working Drawings. Substantial Completion shall have
occurred even though minor details of construction,
decoration, landscaping and mechanical adjustments remain to be completed.
6.
Walk-Through; Punchlist. When Tenant considers the Work in the Premises to be Substantially
Completed, Tenant will notify Landlord and
within THREE (3) business days thereafter, Landlord’s representative and Tenant’s
representative shall conduct a walk-through of the Premises
and identify any necessary touch-up work, repairs and minor completion items
that are necessary for final completion of the Work. Neither
Landlord’s representative nor Tenant’s representative shall unreasonably
withhold his or her agreement on punchlist items. Tenant shall use
reasonable efforts to cause the contractor performing the Work to complete
all punchlist items within SIXTY (60) days after agreement thereon.
7.
Costs. Upon approval of the Working Drawings and selection of a contractor, Tenant shall
promptly execute a work order agreement which
identifies such drawings and itemizes the Total Construction Costs. As used herein, “Total
Construction Costs” means the entire cost of
performing the Work, including design of and space planning for the Work and
preparation of the Working Drawings and the final “as-built” plan
of the Work, costs of construction labor and materials,
electrical usage during construction, additional janitorial services, standard building
directory and suite tenant signage, related taxes
and insurance costs, licenses, permits, certifications, surveys and other approvals required by Law.
Except for the TIA to be paid by
Landlord as described below, Tenant shall be responsible for the Total Construction Costs.
8.
Construction Allowance. In addition to the Landlord’s Work, Landlord shall reimburse
Tenant for the Tenant Improvements in the amount of
[*****] per square foot in the Premises. Landlord shall pay the Tenant improvement
allowance (“TIA”) to Tenant incrementally on a draw basis
as follows. The draws shall be paid to Tenant within
ten (10) days after the each of the following construction milestones: (i) 50% of TIA upon
Tenant’s completion of 50% of Tenant
Improvements and submission of partial lien waivers, (ii) 50% of TIA upon completion of 100% of Tenant
Improvements and receipt of Certificate
of Occupancy (or similar instrument).
9.
Construction Representatives. Landlord’s and Tenant’s representatives for coordination
of construction and approval of change orders will be as
follows, provided that either party may change its representative upon written
notice to the other:
Landlord’s Representative:
TCP Realty Services, LLC
Rubin Kremling
500 North Akard, Suite 3240
Dallas, Texas 75201
713 805-8030
rkremling@tcprealty.com
Tenant’s Representative:
KAMADA PLASMA
c/o Jonathan Ward, Director Facilities and Construction
221 River Street
9th Floor
Hoboken, New Jersey 07030
512-450-8929
jonathanw@kamadaplasma.com
10.
Time of the Essence. Time is of the essence of this Workletter.
Exhibit G – Page 5
EXHIBIT H
EXCLUSIVE AND PROHIBITED USES IN PROJECT
[*****]
Exhibit H – Page 1
Exhibit I
GUARANTY
FOR VALUE RECEIVED and in consideration of, and
as an inducement for the execution and delivery of the within Lease of even date by and between
TCP LAS PALMAS PARTNERS, LTD.,
a Texas limited partnership (the “Landlord”), and KAMADA PLASMA, LLC, a Delaware limited liability
company d/b/a
Kamada Plasma, for certain premises at 803 Castroville Rd., San Antonio, Texas 78237 (the “Tenant”), the undersigned,
KAMADA, LTD,
an Israeli corporation of 2 Holzman St., Rehovot, 7670402, Israel (the “Guarantor”), hereby guarantees
to Landlord, its heirs, executors, administrators,
successors and assigns, the full and prompt payment of Rent and all other obligations
of Tenant, including, but not limited to, any and all other sums and
charges payable by Tenant or the then-holder of the Tenant’s
interest under the lease agreement between Landlord and Tenant dated [ ] (the “Lease”)
including
Tenant’s heirs, executors, administrators, successors, assigns (subject to the terms of the Lease), or by operation of law or other transfer,
and
hereby further guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements therein
provided to be
performed and observed by Tenant under the Lease; and Guarantor hereby covenants and agrees to and with Landlord that if
a default shall at any time be
made by Tenant, in the payment of the Rent and/or any other such sums and charges payable by Tenant under
the Lease, or if Tenant should default in the
performance and observance of any of the terms, covenants, provisions or conditions contained
in the Lease, after the expiration of applicable notice and
cure periods, Guarantor shall and will forthwith pay such rent and other such
sums and charges to Landlord, and any arrears thereof, and shall, and will,
forthwith pay to Landlord all damages that may arise in consequence
of any default by Tenant under the Lease, including, without limitation, all reasonable
attorneys’ fees and disbursements incurred by
Landlord or caused by any such default and/or by the enforcement of this Guaranty. The Lease is
incorporated herein by reference; and
unless specifically defined herein, all capitalized terms used in this Guaranty shall have the same meaning as the
capitalized terms in
the Lease.
This Guaranty is an absolute and unconditional
irrevocable Guaranty of payment and of performance. It shall be enforceable against Guarantor, without the
necessity for any suit or proceedings
on Landlord’s part of any kind or nature whatsoever against Tenant, and without necessity of any notice of
nonpayment, nonperformance
or nonobservance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might
otherwise be
entitled, all of which Guarantor hereby expressly waives and Guarantor hereby expressly agrees that the validity of this Guaranty and
the
obligations of the Guarantor hereunder shall not be terminated, affected, diminished or impaired by reason of the assertion, or the
failure to assert, by
Landlord against Tenant, of any of the rights or remedies reserved to Landlord pursuant to the provisions of the
Lease.
This Guaranty shall be a continuing Guaranty and
shall continue to apply for five (5) years commencing on the date hereof with a twelve (12)-month
rolling guarantee thereafter, through
all amendments, modifications, renewals and/or extensions of the Lease. The liability of Guarantor hereunder shall in
no way be affected,
modified, or diminished by reason of an assignment (subject to the terms of the Lease), subletting, merger, or other transfer of the
Lease,
or by reason of any renewal, modification or extension of the Lease, or by reason of any modification or waiver of or change in any terms,
covenants, conditions or provisions of the Lease between Landlord and Tenant, or by reason of an extension of time that may be granted
by Landlord to
Tenant, or by reason of any dealings or transactions between Landlord and Tenant, whether or not notice thereof is given
to Guarantor.
Exhibit I – Page 1
All of Landlord’s rights and remedies under the
Lease or under this Guaranty are intended to be distinct, separate and cumulative, and no such right and
remedy therein or herein mentioned
is intended to be in exclusion of or a waiver of any of the others.
This Guaranty shall be construed in accordance
with the laws of the State of Texas. Provided Tenant has performed all of Tenant’s covenants and
obligations under the Lease and
Guarantor has performed all of Guarantor’s covenants and obligations under this Guaranty, then effective on the sixth
anniversary
of the Rent Commencement Date, Guarantor’s liability under this Guaranty shall be limited to: an amount equal to twelve months’
of Rent and
additional obligations of Tenant based upon the prevailing rates at the time of demand; plus all interest and late fees on
any past due amount owed to
Landlord pursuant to the Lease; plus all collection costs incurred by Landlord in enforcing the Lease and/or
this Guaranty, including without limitation
attorneys’ fees and expenses.
This Guaranty may be executed in multiple counterparts,
each of which shall constitute one agreement, even though all parties do not sign the same
counterpart. The signature pages taken from
separate individually executed counterparts of this Guaranty may be combined to form multiple fully executed
counterparts; and the delivery
(i.e., the transmission by either party) of his, her or its signature on an original or any copy of this Guaranty (1) in electronic
photostatic
format (e.g., .pdf or .tiff file extension name) or similar format as an attachment to electronic mail (“email”), or (2) via
electronic signature
technology (e.g., DocuSign) shall be deemed to be the delivery by such party of his, her or its original signature
hereon (and shall be treated in all respects
as having the same effect as delivery of an original, so-called “wet ink” signature).
All executed counterparts of this Guaranty shall be deemed to be
originals, but all such counterparts, taken together or collectively,
as the case may be, shall constitute one and the same agreement.
GUARANTOR:
KAMADA, LTD, an Israeli corporation
By:
Name:
Title:
Date:
Exhibit I – Page 2
Exhibit 4.43
LEASE AGREEMENT
This lease (the “Lease”) is
made as of March 7, 2023, 2:41 PM EST (the “Effective Date”) by and between BRIXMOR HOLDINGS 12 SPE, LLC, a
Delaware limited liability company (“Landlord”), and KAMADA PLASMA, LLC, a Delaware limited liability company
(“Tenant”).
In consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency of which the parties
acknowledge, Landlord and Tenant agree
as follows:
1.
Basic Lease Provisions. Wherever used in this Lease,
the following terms shall have the meanings indicated, and where appropriate, constitute
definitions of the same.
(a) Shopping Center: Northshore West located at 1122-1258 Uvalde,
Houston, Texas 77015 (Building Unit: #303301).
(b) Premises: Unit #01 consisting of approximately 12,000 square
feet. To the best of Landlord’s knowledge, without investigation, the Premises
address is 13311 East Freeway, Houston, Texas 77015,
and is subject to Tenant’s independent verification. The Premises and the Shopping Center
are shown approximately on Exhibit “A”
attached hereto. Tenant understands that it must verify specific address requirements of any
governmental licensing or permitting authority
and confirm that the Premises’ unit and street address are correct and meet said governmental
authority’s requirements, prior
to applying for any license or permits.
(c) Landlord’s Notice Address: Brixmor Holdings 12 SPE,
LLC, ℅ Brixmor Property Group, 450 Lexington Avenue, Floor 13, New York, NY
10017, Attention: General Counsel;
with a copy to Brixmor Property Group, 1525 Faraday Avenue, Suite 350, Carlsbad, CA 92008,
Attention: VP, Legal
Services.
(d) Tenant’s Notice Address: Kamada Plasma, LLC, 221 River
St, 9th Floor, Hoboken, NJ 07030, Attention: Jonathan Ward; Telephone: 512-450-
8929; With a copy by email to: jonathanw@kamadaplasma.com.
(e) Trade Name: Tenant shall operate under the trade name “Kamada
Plasma”; and not change it without Landlord’s consent such consent not to be
unreasonably withheld, conditioned or delayed.
(f)
Guarantor: KAMADA, INC., a Delaware corporation.
(g) Permitted Use: Subject to the Shopping Center Exclusives
and Restrictions attached hereto as Exhibit E, Tenant shall use and occupy the Premises
solely for the purpose of a blood plasma donation
center for the screening and registration of donors and the collection and storage of blood
plasma, including all incidental, related,
and necessary elements and functions of other recognized blood plasma collection disciplines which may
be necessary or desirable, including
the sale of blood plasma, and for no other use, business, or purpose. The parties acknowledge and agree that
the Shopping Center’s
other occupants are commercial in nature and therefore, it is imperative that their business operations are not disrupted due
to Tenant’s
operations within the Premises. Therefore, Tenant shall provide a sufficient waiting area within the Premises for its donors so as to
discourage any loitering outside of the Premises by Tenant’s donors. In the event Landlord notifies Tenant in writing of Tenant’s
donors loitering
in front of the premises of other occupants of the Shopping Center more than six (6) times during any twelve (12) month
period, upon Tenant’s
receipt of the sixth (6th) such notice, Tenant, at Tenant’s sole cost and expense, shall employ a security
officer for a period of six (6) months to
patrol the Common Facilities located adjacent to the Premises during Tenant’s hours of
operation within the Premises. At the expiration of the six
(6) months, Tenant’s obligation to employ a security officer shall
terminate, subject to Landlord’s right to provide notices of donors loitering and
again require employment of a security officer
pursuant hereto (after Tenant’s failure to remedy the loitering after receiving a 6th such notice in a
twelve (12) month
period).
(h) Term: The Term shall commence on the date Landlord makes
the Premises available to Tenant (the “Possession Date”), which Possession Date is
estimated to be approximately 90
days from the Effective Date of this Lease and terminate on the last day of the month in which the 10th
anniversary of the Rent Commencement
Date occurs. As used in this Lease, “Term” means the initial term of this Lease together with any option
periods,
extensions, or renewals thereof; and the “Expiration Date” shall that mean the last day of the Term.
(i)
Rent Commencement Date: The earlier to occur of: (i) the
120th day from and including the date Tenant receives its Permits to construct the
Premises as set forth in Section 15(a); or (ii) the
date the Premises are opened for business; provided, however, the Rent Commencement Date
shall not occur until the Landlord’s Work
is completed and accepted by Tenant in Tenant’s reasonable discretion within 7 days after the receipt of
notice that the Landlord’s
Work is completed.
(j)
Minimum Rent: The Minimum Rent during the Term shall be payable
by Tenant to Landlord in monthly installments beginning on the Rent
Commencement Date and on the first day of each calendar month thereafter,
in advance, as follows:
INITIAL TERM
From Month
To Month
Psf
Monthly
Minimum
Rent
Annual
Minimum
Rent
1
60
[*****]
[*****]
[*****]
61
120
[*****]
[*****]
[*****]
FIRST OPTION TERM
From Month
To Month
Psf
Monthly
Minimum
Rent
Annual
Minimum
Rent
1
60
[*****]
[*****]
[*****]
SECOND OPTION TERM
From Month
To Month
Psf
Monthly
Minimum
Rent
Annual
Minimum
Rent
1
60
[*****]
[*****]
[*****]
Month 1 shall mean the period from the Rent Commencement
Date through the last day of the first full calendar month immediately following the
Rent Commencement Date.
(k) Percentage Rent: None.
(l)
Additional Rent:
(1) Initial Monthly Operating Expense Payment: [*****] per
month ([*****] per square foot).
(2) Initial Monthly Tax Payment: [*****] per
month ([*****] per square foot).
(3) Initial Monthly Insurance Payment: [*****] per
month ([*****] per square foot).
(4) Initial Monthly Security Payment: [*****] per
month ([*****] per square foot).
(m) Security Deposit: [*****].
(n) Rent Deposit: Subject to collection, Landlord acknowledges
receipt of a rent deposit of [*****]. The Rent Deposit will be credited
to the first full
month’s installment of Rent (as defined in Section 4).
(o) Tenant’s Percentage: A fraction, the numerator of which
is the square footage of the Premises and the denominator of which is the square footage
of the constructed leasable area of the Shopping
Center (whether leased, vacant, or occupied), which is deemed to be 132,218 square feet, for a
Tenant’s Percentage equal to 11.02%.
All measurements of the Premises and other space in the Shopping Center shall be made from the outside of
the exterior walls and from
the center of interior walls. Tenant’s Percentage may be adjusted from time to time as the square footage of the
Premises or the
Shopping Center changes; provided, however, in no event shall any remeasurement or adjustment occur during the Initial Term.
(p) Broker: Tenant represents and warrants that, except for CBRE,
there are no claims for brokerage commissions or finders’ fees in connection with
this Lease. Tenant shall indemnify Landlord against
and hold it harmless from all liabilities arising from any such claim by any broker or finder.
Landlord represents and warrants that,
except for CBRE, there are no claims for brokerage commissions or finders’ fees in connection with this
Lease. Landlord shall indemnify
Tenant against and hold it harmless from all liabilities arising from any such claim by any broker or finder.
Landlord shall compensate
CBRE directly per the terms of a separate written agreement.
2
2.
Delivery and Premises Condition. Landlord leases to
Tenant and Tenant rents from Landlord the Premises for the Term excepting and reserving to
Landlord the roof, any space above the finished
ceiling and below the finished floor of the Premises, the exterior walls, and the land upon which the
Premises is located. Subject to
the terms of this Lease, Landlord’s grant includes the non-exclusive license to use the Common Areas (as defined in
Section 19).
Tenant shall take possession of the Premises on the Possession Date. Except for Landlord’s Work set forth on Exhibit “B”
attached and
incorporated hereto, Tenant accepts the Premises in their “AS-IS” / “WHERE-IS” condition without
any representation or warranty from Landlord as
to the fitness thereof for Tenant’s use and occupancy, except as follows: Landlord
shall deliver the Premises, inclusive of the Landlord Work, and all
HVAC, shall be in good working order and condition.
3.
Minimum Rent. Tenant shall pay to Landlord the Minimum
Rent, without prior demand or invoice and without any offset or deduction except as set
forth in this Lease, on or before the first day
of each month during the Term, in advance, at the address designated by Landlord in writing. Tenant’s
obligation to pay Minimum
Rent shall commence on the Rent Commencement Date. Starting with the first day of the month after Landlord has sent
Tenant the set-up
instructions to Tenant’s email address set forth in Section 1(d),
Tenant shall make all Rent payments via the online payment portal.
Minimum Rent shall be prorated for any partial month at the beginning
or end of the Term.
4.
Additional Rent and Rent. In addition to Minimum Rent,
all other payments to be made by Tenant to Landlord under this Lease shall be additional rent
(“Additional Rent”),
whether or not designated as such. Landlord shall have the same remedies for the failure to pay Additional Rent as Landlord has
for a
non-payment of Minimum Rent. Tenant’s obligation to pay Additional Rent shall commence on the Rent Commencement Date and (unless
otherwise stated in this Lease), Additional Rent shall be due and payable within 30 days after written demand therefor. Additional
Rent shall be
prorated for any partial month at the beginning or end of the Term. “Rent” means Minimum Rent, Percentage
Rent (if any), and Additional Rent,
individually or in the aggregate. Tenant’s covenant to pay Rent is an independent covenant
of Tenant and the payment thereof shall not be subject to
any withholding, offset, or deduction of any kind except as set forth in this
Lease. Landlord may apply any Rent payment towards any debt or
obligation of Tenant without regard to Tenant’s instructions. No
endorsement or statement made on any check or any communication accompanying
such payment shall constitute an accord and satisfaction;
and Landlord may accept such payment without prejudice to Landlord’s right to recover the
balance of such Rent or pursue any other
available remedy.
5.
Re-occurring Additional Rent Payments.
(a) Operating Expense Payment. The Operating Expense Payment
initially shall be the amount set forth in Section 1(l)(1)
and shall increase by
three percent on the 12th month anniversary of the Rent Commencement Date and each 12 month anniversary
thereafter.
(b) Real Estate Taxes. “Taxes” (a/k/a
“Real Estate Taxes”) means all real estate taxes, fees, betterments and assessments (including special
assessments),
payments in lieu of taxes and assessments, and both ad valorem and non-ad valorem taxes, however the same may be designated,
levied,
assessed, or imposed at any time by any governmental authority upon or against the Premises, land, and/or buildings of the Shopping
Center;
and any fees, assessments, or charges imposed by governmental authorities. Any tax upon the land and/or buildings of the Shopping
Center
or other tax levied or imposed by any taxing authority in lieu of the present method of real estate taxation shall be deemed to be Taxes.
Tenant shall pay to Landlord, in equal monthly installments on the first day of each calendar month during the Term, Tenant’s Share
of Taxes.
“Tenant’s Share of Taxes” means Taxes multiplied by Tenant’s Percentage. In addition, Tenant
shall pay the full amount or allocable amount of
any other tax or assessment chargeable directly or indirectly to, or calculated by reference
to, the Premises or Tenant’s use of the Premises. If the
taxing authority changes the prevailing method of taxation, such new method
still shall constitute “Taxes” for purposes hereof. Taxes shall not
include any penalties or interest for late or
partial payment nor any income, franchise, margin, inheritance, estate, transfer, excise, gift or capital
gain taxes, that are or may
be payable by Landlord or that may be imposed against Landlord or against the rents payable hereunder. Landlord may
contest any and all
Taxes, including prosecuting any applicable tax certiorari proceeding; and Taxes shall include the reasonable costs of such
contest,
including all legal fees, tax consultants, appraisal fees, mediation fees, and court costs.
(c) Insurance Payment. Tenant shall pay to Landlord, in
equal monthly installments on the first day of each calendar month during the Term, Tenant’s
Share of Insurance Costs. “Tenant’s
Share of Insurance Costs” shall mean the costs and expenses of every kind and nature paid or incurred by
Landlord to procure
and maintain commercially reasonable insurance for the Shopping Center (collectively, the “Insurance Costs”) multiplied
by
Tenant’s Percentage. The Initial Monthly Tax Payment shall be the amount set forth in Section 1(l)(3).
(d) Security Cost Payment. Tenant shall pay to Landlord,
in equal monthly installments on the first day of each calendar month during the Term,
Tenant’s Share of Security Costs. “Tenant’s
Share of Security Costs” shall mean the costs and expenses of every kind and nature paid or incurred
by Landlord to provide
security services to the Common Areas (collectively, the “Security Costs”) multiplied by Tenant’s Percentage.
The Initial
Monthly Tax Payment shall be the amount set forth in Section 1(l)(4).
3
6.
Reconciliation Statements. The Operating Expense Payment
is an agreed-upon contribution towards the Shopping Center’s operating expenses and,
except for Taxes, Insurance Costs, and Security
Costs, there will be no reconciliation of the Shopping Center’s actual operating expenses. Within a
reasonable time after the end
of each fiscal year, Landlord shall furnish to Tenant a written statement or statements showing: (i) the total amount of
Taxes,
Insurance Costs, and Security Costs paid or incurred by Landlord during such period; (ii) Tenant’s Share of such cost (i.e.,
Tenant’s Percentage
multiplied by said costs); and (iii) the credit or balance due. Tenant shall pay any balance due to Landlord
within 30 days after receipt of such
statement; and Landlord shall credit any overpayment to Tenant’s account against the
next installment(s) of Tenant’s Share of such cost. At the end of
each fiscal year, Landlord may adjust Tenant’s monthly
payment to equal one-twelfth of Tenant’s Share of Taxes, Insurance Costs, and Security Costs
as estimated by Landlord in accordance
with this Lease for the forthcoming year. Until the issuance of the reconciliation statement referenced herein,
Tenant shall pay the
initial amounts set forth in Section 1(l)
on account of Tenant’s Share of Taxes, Insurance Costs, and Security Costs. Near or at the
end of the Term, Landlord will render
a final (or estimated final) statement to Tenant for all Rent accruing through the Expiration Date (“Final
Reconciliation Statement”);
provided, however, in no event may Landlord increase the amounts owed by Tenant for Taxes, Insurance Costs and/or
Security Costs for
any period prior to the final year of the Term. Tenant shall pay any balance due on the Final Reconciliation Statement by the
30th day
from receipt thereof; and Landlord shall refund any balance owed within 30 days after sending the Final Reconciliation Statement.
7.
Taxes on Rentals, Personal Property Taxes, and Taxes on
Leasehold. If the Shopping Center is located in a jurisdiction that presently or in the future
imposes a sales tax or other tax on
Rent, Tenant shall pay the tax assessed by such taxing authority, simultaneously with each payment of Rent, when
due to Landlord. Tenant
shall be responsible for, and shall pay before delinquency, all taxes assessed against any leasehold interest or improvements,
alterations,
fixtures, and/or personal property of any kind owned by or placed in, upon or about the Premises by Tenant, whether such taxes are
assessed
against Landlord or Tenant.
8.
Late Fee, Interest, and Returned Check Fee. If Tenant
does not make any Rent payment by the [*****] business day from and including
its due date (a
“late payment”), then a late fee of [*****] for
each dollar overdue shall become immediately due to Landlord (the “Late Fee”). In addition, all late
payments shall
bear interest at rate of nine percent per annum. If any check from Tenant is not honored by Tenant’s bank, then Tenant shall pay
an
administrative charge of [*****] per dishonored check. The parties
stipulate that the Late Fee, interest payment, and check-dishonored fee constitute a
fair and reasonable estimate of the damages incurred
by Landlord, which actual damages are impractical to ascertain.
9.
Security Deposit.
(a) Subject to collection, Tenant has deposited with Landlord
the Security Deposit set forth in Section 1(m).
Landlord shall hold the Security Deposit,
without liability for interest, as security for performance by Tenant of all of Tenant’s
obligations under this Lease. Landlord may apply the
Security Deposit (or any part thereof) for: (i) any unpaid and past due Rent;
(ii) any sum expended by Landlord on Tenant’s behalf due to a default
under this Lease; (iii) any expenses/damages incurred
by Landlord by reason of Tenant’s default and/or breach; and/or (iv) any final balance
owing to Landlord pursuant to the Final
Reconciliation Statement (See, Section 6). Should Landlord apply all or
any portion of the Security
Deposit, Tenant shall remit to Landlord an amount sufficient to restore the Security Deposit to its original
balance within [*****] days of demand
therefor by Landlord. Provided
Tenant shall not default under this Lease beyond applicable notice and cure periods, then Landlord shall return the
Security Deposit
(or any remaining balance thereof) to Tenant, within [*****] days
after the later to occur of: the Expiration Date; the date upon
which Tenant has surrendered the Premises in the condition required by
this Lease; or the issuance of the Final Reconciliation Statement.
Landlord’s return of the Security Deposit to the then-holder
of Tenant’s interest under this Lease (according to Landlord’s books and records) shall
relieve Landlord from all further
obligation and liability to Tenant with regard thereto. In the event of a transfer of Landlord’s interest in the
Premises, Landlord
shall transfer the Security Deposit to said transferee and upon such transferee’s assumption of this Lease including the
Security
Deposit, Landlord shall be relieved from all further obligation and liability to Tenant for the Security Deposit.
(b) Notwithstanding anything to the contrary in this Section
9(a), provided that Tenant is not then in default in the performance of any term, covenant,
condition or agreement provided for in this
Lease beyond applicable notice and cure periods, commencing on the first anniversary of the Rent
Commencement Date, Landlord agrees to
apply [*****] and [*****]
Dollars [*****] of the Security Deposit, at a rate of [*****]
and [*****]
Dollars [*****]
per year on each anniversary of the Rent Commencement Date toward Rent, until depleted. For the avoidance of doubt, the
remaining
[*****] Dollars and [*****]
shall be returned to Tenant in accordance with the provisions of Section 9(a) of this Lease.
4
10. Tenant’s Covenant to Open and Operate. Tenant shall open for business under the Trade Name
within [*****] days of the Rent Commencement Date
and thereafter be fully
fixtured, stocked, and staffed during the Shopping Center’s hours of operation. If Tenant fails to open within the time specified
herein and thereafter operate, then, in addition to Landlord’s rights and remedies under Section 29, Minimum Rent shall increase
by [*****] for the
period commencing on the [*****]
day after the Rent Commencement Date and ending on the day Tenant opens/reopens for business, which Tenant
stipulates is a fair and reasonable
estimate of Landlord’s damages given the impact on the Shopping Center. Tenant shall use only such space in the
Premises for office,
clerical or other non-selling purposes as is reasonably required. Tenant shall display, sell, and advertise only first-quality
merchandise;
and store/stock only such goods as Tenant intends to sell from the Premises. Tenant shall not conduct any sales or promotions other than
in the ordinary course of the Tenant’s regular business operations, including any auction, fire, bankruptcy, store closing, “lost
our lease,” or going out of
business sale. Tenant shall not solicit any business nor distribute any advertising matter in the parking
lot or other Common Areas. Tenant shall abide
by the Shopping Center rules and regulations promulgated by Landlord. Landlord’s consent
to Tenant’s Permitted Use shall not constitute a
representation or warranty by Landlord that such use is lawful or permitted. Tenant
shall not perform any acts or carry on any practice that (i) would
violate the rights of any other tenants in the Shopping Center,
including any exclusive, restriction, or restrictive covenant affecting the Shopping
Center, (ii) cause, or may cause, any noise,
music, or odors to emanate from the Premises, (iii) cause damage to the Shopping Center, or (iv) be a
nuisance, disturbance,
or menace to Landlord, the other tenants, or the public.
Notwithstanding anything
contained herein to the contrary, if Tenant ceases operating a business at the Premises for [*****]
consecutive days or more
during the Term, subject to Permitted Closures, and if such cessation continues for more than [*****]
days after Landlord’s written notice thereof to
Tenant, then at any time thereafter for so long as such cessation continues, Landlord
shall have the right to terminate the Lease by written notice given
to Tenant. The termination notice shall state the date of termination
and the Lease shall terminate on such date as if that was the originally fixed
expiration date of the Term. If Landlord has given Tenant
a Construction Allowance and/or paid a commission to a Broker, then Tenant shall pay
Landlord the unamortized amount(s) calculated on
a straight-line basis over the Lease Term as of the termination date pursuant to this provision.
11. Competing Operations. Tenant (either directly or through
an affiliate, subsidiary or related person or entity) shall not open another store for a
competing business within a radius of two miles
from the outside boundary of the Shopping Center measured in a straight line without reference to
road mileage.
12. Sales Reporting. Intentionally deleted.
13. Utilities. Tenant shall apply for and pay for all
utilities used at the Premises together with all connection fees, tap fees, taxes and/or other charges
levied thereon. If any utility
is measured by a master meter, then Tenant shall pay Landlord for Tenant’s utility consumption within 30 days of receipt
of
Landlord’s invoice. Tenant shall submit to Landlord such data with respect to Tenant’s consumption of electricity, gas and
water in the Premises (if
electricity, gas and water are separately metered) within 30 days after the end of each calendar quarter
during the Term after written request by
Landlord. Landlord may designate the electrical service provider for the Shopping Center; and
Tenant shall contract for electrical service for the
Premises either with the Landlord or, at Landlord’s option, directly with
Landlord’s designated service provider. In addition, Landlord may, subject to
applicable law, install systems and equipment in
the Shopping Center that will generate alternative or renewable energy and/or recycled water and/or
obtain the same from third party
vendors for consumption in the Shopping Center, including the Premises. Landlord may install equipment (including
sub-meters) and other
appurtenances in and around the Shopping Center and the Premises to cause alternative/ renewable energy and/or recycled water
to be furnished
to the Shopping Center. If Landlord designates or changes a service provider, Tenant shall cooperate with Landlord or Landlord’s
service provider, including, providing access (at reasonable times and upon reasonable notice) to the electric lines, feeders, risers,
wiring, and related
equipment within the Premises. Electrical service to the Premises may be furnished by one or more companies providing
electrical generation,
transmission, and/or distribution services. In such event, Tenant shall purchase and pay for the same either directly
to the supplier or, at Landlord’s
option, as Additional Rent. Landlord may charge Tenant for the cost of electric service to the
Premises as a single charge or divided into and billed in a
variety of categories such as distribution charges, transmission charges,
generation charges, public good charges, or other similar categories. Landlord
may aggregate the electrical service for the Premises
and other premises within the Shopping Center, purchase electricity for the Shopping Center,
including the Premises, through a broker
and/or buyers group, and change the providers and manner of purchasing electricity from time to time.
Landlord may discontinue supplying
such utility service(s) upon prior notice to Tenant sufficient for Tenant to obtain replacement service. Landlord
shall be entitled to
receive a commercially reasonable utility management fee (if permitted by law) for the services provided by Landlord in connection
with
the selection of utility companies and the negotiation and administration of contracts for the generation of electricity to the Shopping
Center. In
addition, if Landlord bills Tenant directly for the cost of electrical service to the Premises, the cost of electrical service
may include (if permitted by
law) a [*****] administrative fee to reimburse Landlord for the cost of reading meters, preparing invoices,
and related costs. If not installed, but
separate metering is available for any utility, Landlord may install such separate meter at
Tenant’s expense, which expense, plus an administrative fee
of [*****]
shall be amortized over 12 months and paid as Additional Rent but in no event shall Landlord install a separate meter within
the last 12
months of the Term. Except to the extent of Landlord’s gross negligence or willful misconduct, Landlord shall not be
liable for any loss, damage, or
expense that Tenant may sustain or incur because of any interruption, failure, interference, change,
or defect in the supply or character of utilities
furnished to the Premises.
5
14. Trash Removal. Tenant shall pay directly to the service
provider for the cost of trash collection and disposal from the Premises and related recycling
services. Tenant shall use the trash hauling
service designated by Landlord for the Shopping Center.
15. Tenant’s Work.
(a) Tenant shall complete all work to prepare the Premises for
Tenant’s use and occupancy, at Tenant’s sole cost, in accordance with the plans and
specifications approved by Landlord (“Tenant’s
Work”), which shall specifically include, but not be limited to, slab work and the installation of a
sprinkler system with
the riser room located within the Premises, rooftop mechanical equipment for Tenant’s freezer, rooftop HVAC system and
rooftop
satellite dishes, if any, subject to the Satellite Dish or Antenna requirements in Paragraph 52 below. Tenant shall have access to the
rooftop
of the Premises without being charged a rooftop access fee by Landlord. Tenant shall equip the Premises with all furniture, fixtures,
and equipment
necessary for the operation of Tenant’s business. Within 20 days from and including the Effective Date, Tenant
shall submit to Landlord for
approval, complete construction plans and specifications, prepared by licensed architects and engineers
previously approved in writing by
Landlord, describing Tenant’s Work in CAD file format. Tenant shall not commence any construction
in the Premises until Landlord has approved
Tenant’s plans such approval not to be unreasonably withheld, conditioned or delayed.
Within five business days from and including the date
Landlord approves Tenant’s plans, Tenant shall use commercially reasonable
efforts to apply for all permits, approvals, and licenses necessary for
Tenant to perform Tenant’s Work and operate Tenant’s
Permitted Use in the Premises (the “Permits”). Tenant thereafter shall pursue approval of
the Permits with all continuity,
diligence, and dispatch. Tenant shall provide Landlord with copies of all permit applications and other government
filings contemporaneous
with submitting the same to the applicable governmental authority. Landlord shall provide full reasonable cooperation to
Tenant with
applicable authorities in connection with obtaining and renewing any permits, and any reporting requirements for the operation of
Tenant’s
business. If the Permits are not issued by the 150th day from and including the Effective Date of this Lease, then Landlord
may, upon
notice to Tenant, elect either to (i) terminate this Lease at any time thereafter; or (ii) pursue any such open permit
on Tenant’s behalf at Tenant’s
cost for a period of sixty (60) days; and Tenant shall cooperate with Landlord in such efforts;
provided, however, in the event Landlord is unable
to obtain the Permits during such 60 day period, Tenant may terminate this Lease,
after expiration of the 60 day period. Once the Permits are
available to be picked-up, Tenant promptly shall pick-up such Permits, retain
a contractor, commence and complete Tenant’s Work, obtain a
certificate of occupancy, and open for business. Upon receipt of Tenant’s
permits, Tenant shall retain a contractor, commence and complete
Tenant’s Work, obtain a certificate of occupancy, and open for
business as set forth in this Lease. For Construction Allowance, See, Rider
Section 47.
(b) The following shall apply whenever Tenant is performing work
in/at the Premises, including Tenant’s Work: Tenant shall not perform any other
work in or outside the Premises during the Term
without Landlord’s consent such consent not to be unreasonably withheld, conditioned or
delayed. All work shall be performed in
a good and workmanlike manner and in compliance with applicable laws, building codes, and safety
standards/regulations. Tenant shall
pursue completion of such work with all continuity, diligence, and dispatch. Landlord shall have the right to
enter the Premises at reasonable
times to inspect Tenant’s work. Landlord’s approval of any plans and consent to perform the work described
therein shall not constitute
an agreement that such plans or work conform to applicable legal requirements. Tenant shall not install any equipment
that will exceed
the capacity of any utility. Tenant may retain only licensed and insured contractors approved by Landlord who shall comply with
Landlord’s
Contractor’s Rules and Regulations; provided however, Tenant’s critical vendors are attached hereto as Exhibit D and
are hereby
approved by Landlord. Within 60 days of completing Tenant’s Work, Tenant shall send Landlord a (1) copy of
Tenant’s certificate of occupancy
(temporary, if applicable) and (2) set of as-built drawings of the Premises in CAD file
format. Tenant promptly shall procure the cancellation or
discharge of all notices of violation arising from Tenant’s work. Tenant
promptly shall pay all contractors and materialmen for Tenant’s work; and
procure, at Tenant’s expense, the satisfaction
or discharge of record of all liens and encumbrances within 30 days after Tenant’s receipt of notice of
the filing thereof.
In the event Tenant fails to respond to Landlord within 5 business days, Landlord may, at its option, bond, or pay-off the lien or
claim
amount without inquiring into the validity thereof; and Tenant shall reimburse Landlord for Landlord’s expenses incurred to discharge
said
lien (including reasonable attorney’s fees) and an administrative charge of [*****].
Landlord may post at the Premises notices of non-
responsibility, or such other notices that under applicable law will preclude the filing
of a mechanic’s lien. Tenant will indemnify Landlord and
save Landlord harmless from and against all claims, actions, suits at
law or equity, judgments, expenses, damages, costs, liabilities, fines, and
debts in connection, arising from or in any way related to:
any injury, loss, or damage arising from any of Tenant’s work, including any labor strife
(including legal fees and/or private
security expenses) and any mechanic’s and other liens and encumbrances filed in connection with Tenant’s
work (including
Landlord’s reasonable legal fees).
6
(c) With respect to Tenant’s Work and any future work performed
by Tenant during the Term, Tenant shall comply with the rules and regulations of
the Texas Architectural Barriers Department of the Texas
Department of License and Regulation (“TDLR”) regarding compliance with the
Americans With Disabilities Act of 1990, as amended
and modified. Tenant’s obligations hereunder shall extend to the Premises and any work in
the Common Areas triggered by such Tenant
work. In the event that the cost to perform such Tenant work exceeds [*****],
then within thirty (30)
days of completing of such Tenant’s work, Tenant shall obtain an inspection report of the Premises and
the Common Areas within the immediate
vicinity thereof from a certified accessibility specialist to confirm Tenant’s compliance
herewith (the “TDLR Report”). Tenant shall use the
Shopping Center’s designated certified accessibility specialist
[*****] (the “Center CAS”) to conduct the TDLR inspection.
In the event that
Tenant does not use Center CAS, Tenant shall be liable for all costs and expenses to render the Premises, Common Areas,
and any other parts of
the Shopping Center in compliance with TDLR Report, including the costs incurred to obtain a TDLR compliance certificate.
Tenant shall provide
Landlord with a copy of the TDLR Report promptly upon Tenant’s receipt. Within sixty (60) days from the date
of the TDLR Report, Tenant will
correct any non-compliance issues identified in the TDLR Report in the Premises in the manner required
by the TDLR Report. Landlord will
correct any non-compliance issues in the Common Area identified in the TDLR Report in the manner required
by the TDLR Report and Tenant
shall reimburse Landlord for the reasonable out-of-pocket costs incurred in connection therewith plus a
[*****] construction management fee.
(d) Notwithstanding the foregoing, Tenant shall have the right
to make, without Landlord’s consent, non-structural Alterations to the Premises which
do not exceed in cost [*****]
in the aggregate during each Lease Year or alterations that are of a cosmetic nature such as painting, wallpapering
and carpeting,
or involves redecorating the interior of the Premises; is not visible from outside the Premises; will not affect the systems or
structure
of the Premises, including work to be performed inside the walls or above the ceiling of the Premises. In addition, in the event the
FDA,
MHRA, or any other regulatory or governmental agency requires any alterations to the interior of the Premises for the continued
operations of
Tenant’s business, then Tenant shall be permitted to make such alterations to the interior of the Premises with prior
notice to, but without consent
of, Landlord.
16. Signage. Before opening, Tenant shall purchase an
identification sign and install it above the Premises entrance. Prior to installing any sign, Tenant
shall submit a proposed signage
rendering (in a form suitable for applying for any required permits and approvals) showing, at a minimum, the
placement of such signage
on a picture of the actual storefront with the proposed dimensions thereof and the proposed method of installation (“Sign
Package”)
for Landlord’s review and approval, such approval not to be unreasonably withheld, conditioned or delayed. All signs, awnings,
and
canopies shall comply with all applicable laws and codes (without the need for a variance); and the Landlord’s sign criteria.
Except for Tenant’s
storefront sign, Tenant shall not install or maintain any other sign, awning, or canopy in or outside the Premises
or in the Shopping Center. Landlord
acknowledges that Tenant shall be permitted to have a double-sided sign panel on two (2) of the Shopping
Center pylon signs pursuant to the signage
criteria attached hereto on Exhibit C and in the locations depicted on Exhibit C attached
hereto, pursuant to a separate agreement between Landlord
and Tenant.
17. Repairs. Landlord, at its sole cost and expense, shall
keep the foundations, concrete slab, parking areas, and structural portions of the outer walls of the
Premises and the Common Areas in
good repair and condition, including replacement when necessary. Landlord, subject to reimbursement as an
Operating Expense Payment,
shall keep the roof and roof membrane of the Premises, parking areas and, the Common Areas in good repair and
condition, including replacement
when necessary. Except as set forth above, Landlord shall not be required to make any other repairs of any kind upon
the Premises. Tenant
shall, at Tenant’s cost and expense, make all other repairs and replacements to the Premises including the fixtures, equipment
(including the heating, ventilation and air conditioning equipment and system exclusively serving the Premises (“HVAC”)),
and utility lines (e.g.,
electrical, gas, plumbing, and sewage facilities/lines) exclusively serving the Premises up to the point
of connection to the main line(s), as well as
cages for utility boxes. In addition, Tenant shall keep the Premises in a clean, sanitary,
and attractive condition. Tenant shall keep in effect an HVAC
maintenance agreement, with a contractor approved by Landlord provided
however the vendors listed on Exhibit D attached hereto are hereby
approved by Landlord, which agreement shall require, at a minimum,
quarterly visits during the Term followed by a written HVAC condition report
with a copy sent to Landlord. If after notice, Tenant fails
to make any repair or replacement as required by this Lease, Landlord may, in addition to any
other rights it may have under this Lease,
make such repairs or replacement on Tenant’s behalf at Tenant’s cost. In such event, Tenant shall reimburse
Landlord for
Landlord’s actual out of pocket costs within 30 days after demand therefor plus a [*****] administrative fee.
7
18. Access. Landlord may enter the Premises at reasonable
times and upon reasonable prior written notice to make repairs, perform regular maintenance,
make inspections, and, during the last 6
months of the Term, show the same to prospective tenants, purchasers, and other parties. If the Premises
contain means of access to the
roof, basement, or electrical/riser room, Landlord may enter the Premises at reasonable times and upon reasonable
written notice to gain
access thereto. In the case of an emergency, Landlord may enter the Premises without notice to Tenant and without Tenant being
present.
Landlord shall be liable for all loss, damage, or injury to persons or property and shall indemnify and hold Tenant harmless from all
claims,
losses, costs, expenses and liability, including reasonable attorney’s fees resulting from Landlord’s entry except
to the extent caused by the grossly
negligent or intentional act of Tenant or its contractors, agents, employees or licensees. Landlord
and its representatives shall use commercially
reasonable efforts to avoid interfering in Tenant’s ongoing business operations
during any such entry. Tenant shall have the right to have a
representative accompany Landlord during any such entry.
19. Common Areas. “Common Areas” mean
all areas of the Shopping Center made available by Landlord for the common use of Landlord, tenants, and
any other persons having rights
thereto (by easement or grant) and their respective customers and invitees, including the improvements, equipment,
parking areas, and
facilities located thereon or used in connection with the operation thereof. All Common Areas shall be subject to the exclusive
control
and management of Landlord. Landlord may change the Common Areas, add to the Common Areas, and/or subtract from the Common Areas,
including
changing, reconfiguring, or relocating the various entrances, curb cuts, access/services roads, and/or parking areas so long as access
to the
Premises is not materially or adversely impeded. Landlord may dedicate portions of the Common Areas for commercial uses and tenant/customer
amenities, including permitting the temporary use of portions thereof and the installation of signs, storage units, cart corals, ATMs,
cell towers,
billboards, electric vehicle charging stations, and similar hardware/equipment. Tenant shall not solicit any business nor
distribute any advertising
matter in the parking lot or other Common Areas.
20. Compliance With Laws. This Lease and the rights and
obligations of the parties hereunder shall be governed by the laws of the state in which the
Shopping Center is located (the “State”).
From and after the Possession Date, Tenant, at its own cost and expense, shall comply with all laws, including
all orders and regulations
now or hereafter in effect, including the Americans with Disabilities Act (the “ADA”). Tenant represents that neither
Tenant,
nor the principals, officers, partners, and/or members of Tenant: (i) are identified on any U.S. Government or other government
list of prohibited or
restricted parties, including, the Specially Designated Nationals and Blocked Persons List maintained by the U.S.
Department of the Treasury, or
(ii) are owned or controlled by or acting on behalf of a party on any such list.
21. Environmental Compliance. Landlord and Tenant each
shall comply with all applicable federal, state, and local laws, rules, orders, regulations,
statutes, ordinances, codes, use permits,
judgment, or decrees relating to or imposing liability or standards of conduct concerning environmental
conditions and/or hazardous materials
(“Environmental Law”). “Hazardous Materials” mean (i) any hazardous, toxic or dangerous waste,
substance or
material defined under any Environmental Law as now or at any time hereafter in effect; (ii) any other waste, substance
or material that exhibits any of
the characteristics enumerated in 40 C.F.R. §§ 261.20 through 261.24,
inclusive, and those extremely hazardous substances listed under Section 302 of
SARA that are present in threshold planning or reportable
quantities as defined under SARA and toxic or hazardous chemical substances that are
present in quantities that exceed exposure standards
as those terms are defined under Section 6 and 8 of OSHA and 29 C.F.R. Part 1910; (iii) any
asbestos or asbestos
containing substances whether or not the same are defined as hazardous, toxic, dangerous waste, a dangerous substance or
dangerous material
in any Environmental Law; (iv) “Red Label” flammable materials; (v) petroleum based products (vi) all laboratory
waste and by-
products; and (vii) all bio-hazardous materials. Tenant shall not generate, manufacture, refine, transport, treat,
store, handle, or dispose of any
Hazardous Materials in or around the Shopping Center. Tenant immediately shall notify Landlord of any
environmental concerns, liabilities, or
conditions of which Tenant is, or becomes, aware, including any release or suspected release
of any Hazardous Materials from the Premises. Tenant
shall not file any documents or take any other action under this Section without
Landlord’s prior written approval. Landlord may file such documents
or take such action instead of or on behalf of Tenant (but at Tenant’s
sole cost and expense), and Tenant shall cooperate with Landlord in so doing.
Tenant shall (i) provide Landlord with copies of any
documents filed by Tenant pursuant to any Environmental Law; (ii) permit Landlord to be present
at any inspections and/or meetings
with government environmental officials; and (iii) provide Landlord with an inventory of materials and substances
dealt with by
Tenant at the Premises, as well as such additional information for government filings or determinations as to whether there has been
compliance with an Environmental Law. Landlord shall have the right to enter the Premises at reasonable times and upon reasonable notice
to inspect
the Premises or to conduct tests to discover the facts of any suspected or potential environmental condition or violation.
Tenant shall defend, indemnify
and hold Landlord harmless against any claims, actions, fines, penalties, liability, loss, damages, cost
or expense, including consultants’ and attorneys’
fees and costs (whether or not legal action has been instituted), incurred
by reason of (i) the presence of Hazardous Materials at, under or about the
Premises (except for Hazardous Materials present at
the Premises on the Possession Date or introduced by any other party including Landlord), or
(ii) any failure by Tenant to comply
with the terms hereof or with any Environmental Law, now or hereafter in effect. Tenant’s obligations contained in
this Section
shall survive the expiration or earlier termination of this Lease, including any post-Term monitoring and remediation. Without limiting
the
generality of the foregoing, Landlord acknowledges that the following Hazardous Materials, among others, are required for Tenant’s
business
operations: Accel TB, Alcohol Gel Moisturizing Hand Sanitizer, Alcohol Prep Pad, Anticoagulant Sodium Citrate (Baxter), Anticoagulant
Sodium
Citrate (Haemonetics), Chloraprep, Chlorine Bleach, CRC Ultra-Lite Spray, Epipen, Fingernail Dye (RI-10), Glycerin, Green Z, HemataCHEK,
Instant
Ice Pack, IO-Gone, Isopropyl Alcohol 70%, Isopropyl Alcohol 90%, Opti-Cide-3, Povidone Iodine Swabsticks, Purell Hand Sanitizer,
Propylene
Glycol, Refractrol Low, Refractrol Normal, Sani-Cloth Plus Germicidal Disposable Cloth, Vacuette Z No Additive 3ml, and Vacuette
Z Serum Sep
Gel. To the best of Landlord’s knowledge, Landlord has not received any written notice from any governmental or private
entity relating to Hazardous
Materials on the Premises. Landlord hereby covenants and agrees that if any Hazardous Materials above any
legal limits and subject to Environmental
Law, are discovered at the Premises attributable to the period prior to the Possession Date
or which has been caused by anything other than by Tenant’s
acts or omissions, Landlord shall, upon written notice from Tenant,
remediate such Hazardous Materials as required by Environmental Law. Landlord
shall indemnify, defend and hold Tenant harmless from and
against any and all environmental damages arising from the presence of hazardous
materials upon, about or beneath the Premises or arising
in any manner whatsoever out of the violation of any environmental requirements pertaining
to the Premises and any activities thereon,
which conditions exist or existed prior to or on the Possession Date. The provisions of this Section shall
survive the expiration or
earlier termination of this Lease.
8
22. Assignment and Subletting.
(a) Tenant may, without Landlord’s consent, assign this
Lease to any person, corporation, partnership or other entity which acquires all or
substantially all of the business or assets of Tenant
or stock in Tenant; any person, corporation, partnership or other entity which controls, is
controlled by or is under common control
with Tenant; or any affiliate (within the meaning of such term as set forth in Rule 501 of Regulation D
under the Federal Securities
Act of 1933) of Tenant, provided: (i) Tenant is not in default (beyond an applicable notice and cure period) of this
Lease; (ii) such
assignee or surviving entity shall have a Tangible Net Worth (as defined in Section 22(g)
equal to or greater than the Tangible Net
Worth of Tenant as of the Effective Date; (iii) Landlord receives an executed copy of
such assignment within 15 days following its effective date;
(iv) the assignee assumes all of Tenant’s covenants and
obligations of this Lease; (v) such assignment shall not relieve Tenant of or from its
obligations under this Lease; and (vi) the
Guarantor, if any, shall reaffirm the Guarantor’s continuing obligations under any Guaranty then in force.
Notwithstanding the
foregoing, if the assignee has had no Events of Default for a period of two years after the assignment date (“Two Years Post
Assignment
Date”), then the Guarantor shall be released from its obligations so long as the assignee has a net worth at least equal to or
greater
than the net worth of Guarantor as of Two Years Post Assignment Date.
(b) Any other assignment or sublease only may be made with Landlord’s
written consent, which consent without Landlord’s prior written consent
which consent shall not be unreasonably withheld, conditioned
or delayed. If Tenant seeks to assign this Lease or sublet the Premises, then
Landlord shall have a period of 60 days following
Tenant’s request to: (i) grant such consent; (ii) deny such request; or (iii) recapture the Premises.
If Landlord elects
to recapture the Premises, and Tenant does not rescind its request to assign or sublease within 10 business days, then this Lease
will
terminate on the effective date of the proposed assignment or sublease as if said date had originally been set forth as the Expiration
Date.
Landlord’s failure to respond to Tenant’s request within the time-specified herein shall constitute Landlord’s
denial of Tenant’s request.
(c) Tenant’s request to assign or sublet shall be in writing,
sent in the manner required by Section 32, and include the following: (i) the full particulars
of the proposed transaction, including its nature, effective date, terms, and conditions; (ii) a description of the identity, Tangible
Net Worth, and
previous business experience of the proposed assignee/subtenant, including complete audited financial statements prepared
by a reputable
accountant for the prior year and unaudited for the current year to date; (iii) a copy of the proposed assignee’s
/ subtenant’s federal income tax
return for the past three years; and (iv) a non-refundable fee of [*****]
payable to Landlord on account of the Transaction Fee required below.
Tenant shall provide Landlord with such further information
and documentation as Landlord may deem relevant to its review of Tenant’s request.
(d) Any assignment shall be on Landlord’s form subject
to commercially reasonable revisions. If Tenant requires the use of any other form, Tenant
shall reimburse Landlord for Landlord’s
out-of-pocket expenses incurred in connection therewith, including reasonable attorney’s fees; and may
collect, in advance, a [*****]
retainer to be applied towards Landlord’s legal fees and costs.
(e) Each assignee or transferee shall assume all of the terms,
conditions, and covenants of this Lease to be performed by Tenant hereunder; and any
assignment shall contain such assumption, except
Tenant acknowledges that any option to renew the term of this Lease is personal to said original
named Tenant herein and is not assignable
during the first five years of the Term. Tenant shall at all times remain jointly and severally liable with
such assignee for the full
and timely performance of all of the terms, covenants, and conditions contained in this Lease. In any right of action that
may accrue
to Landlord, Landlord may proceed against Tenant without having commenced any action or obtained a judgment against any
subsequent assignee
or transferee. Tenant shall not be released by, or as a result of, any subsequent assignment or transfer of this Lease. No
amendment,
modification, extension, or renewal of this Lease shall release Tenant from its obligations under this Lease.
(f)
In the case of a sublease, in addition to other terms and
conditions as set forth herein, Tenant and Tenant’s subtenant shall agree that: the sublease
and subtenant’s interest and
rights are subject and subordinate to this Lease; in the event of any conflict between this Lease and the sublease, this
Lease shall
control; Tenant shall remain primarily liable for all of Tenant’s obligations under this Lease; and Landlord’s consent shall
not create
any contractual relationship or other state of privity between Landlord and the subtenant. For the convenience of the parties,
the subtenant may
pay the Rent and perform Tenant’s other obligations under this Lease on Tenant’s behalf; and Landlord may
accept such payment and performance
without prejudice to Landlord’s rights hereunder. Tenant shall receive from its subtenant the
current market rent for the subleased premises and if
the rent payable under the sublease exceeds the Rent under this Lease, then Tenant
shall pay to Landlord such excess amount upon receipt of
payment by Tenant (but after deduction of Tenant’s reasonable transaction
costs and expenses related to such sublease, including but not limited
to, brokerage fees and subtenant inducement payments). For the
purposes hereof, the term “rent” shall mean all minimum rent, additional rent, and
other payments and/or consideration payable
by the subtenant to Tenant however defined or paid (e.g., in installments or in a lump sum payment)
less Tenant’s expenses obtaining
the subtenant.
9
(g) As used herein, “assignment” means an assignment,
transfer, or other conveyance of this Lease, Tenant’s interest in this Lease, and/or a controlling
interest in Tenant except that
the public offering of stock in Tenant through a nationally recognized stock exchange shall not constitute an
assignment of this Lease
requiring Landlord’s consent. Tenant may not mortgage, encumber, collaterally assign, or otherwise transfer this Lease as
security
or collateral; and such transactions shall not be deemed “assignments” governed by this Article. “Tangible Net Worth”
means the excess
of total assets over total liabilities, in each case as determined in accordance with generally accepted accounting
principles consistently applied
(“GAAP”). Any subsequent assignment or sublease shall be subject to the terms of this
Article. Any transfer made in violation of this Article shall
be void and confer no rights upon any purported transferee, assignee, mortgagee,
or occupant. Landlord’s acceptance of Rent from any person
other than Tenant shall not be construed as Landlord’s consent
to any such purported transfer nor estop Landlord from pursuing Landlord’s rights
and remedies under this Lease. Tenant shall retain
any net profits paid in connection with an assignment to an assignee of the asset of Tenant’s
business.
23. Tenant’s Insurance. To the full extent permitted
by law, Tenant shall indemnify and defend Landlord and save it harmless from and against any suits,
actions, damages, claims, judgments,
costs, liabilities, and expenses in connection with loss of life, bodily injury, property damage or any other loss or
damage arising
from, any occurrence in, upon, at, or from the Premises, resulting from Tenant’s use and occupancy of the Premises, or occasioned
by
any negligent act or omission of Tenant, its agents, contractors, employees, servants, invitees, licensees or concessionaires, including
use of the
Common Areas. Tenant’s indemnification obligations shall not be limited by the provisions of any workers’ compensation
act, similar statute, or by
any action of Tenant’s insurance carrier, and shall survive the expiration or earlier termination of
this Lease. Tenant shall maintain, at Tenant’s sole cost
and expense: “Special Form” insurance coverage (or
its then equivalent successor) that shall include fire and extended coverage insurance covering
100% of the cost of replacement
of all furniture, fixtures, any added non-structural components of the walls and storefronts provided by Tenant,
equipment, inventory,
and Tenant improvements in or serving the Premises in the event of a loss; commercial general liability insurance with a
deductible of
no more than [*****], including contractual liability coverage,
covering bodily injury and property damage liability and, unless insured
under a business automobile policy, automobile ownership, non-ownership
and hired car liability, in the broadest and most comprehensive forms
generally available with “General Aggregate Amount and Per
Occurrence Limits” of liability as follows: Minimum Liability Coverage of [*****] per
occurrence and [*****] in the aggregate. Tenant may satisfy the
foregoing coverage requirements in a single policy or a combination of a primary
policy with coverage of at least [*****] per
occurrence and [*****] in the aggregate plus an excess liability
policy (a/k/a an umbrella policy) with
coverage of at least [*****];
and workers compensation with coverage of the greater of [*****]
or such amount required by the State. Tenant’s general
liability insurance shall be written on an occurrence basis. Tenant’s
property coverage shall include earth movement and flood coverage if the
Shopping Center is located in a jurisdiction where Landlord’s
insurance includes such flood and/or earthquake coverages. Tenant shall insure: (i) all
outside plate glass in the Premises and
(ii) all boilers and HVAC equipment exclusively serving the Premises in the amount of [*****].
Landlord
makes no representation to Tenant that the minimum amount of insurance required to be carried by Tenant under this Lease is
adequate to protect
Tenant’s interest. All companies providing Tenant’s insurance shall have a minimum A.M. Best rating
of A-X and be authorized to transact business in
the State. Tenant’s insurance shall name Landlord and its successors and/or assigns
(and as Landlord directs, its ground lessors, lenders, affiliates, and
managers) as additional insured(s) under Tenant’s general
liability insurance policy providing the above-coverage. On or before the Possession Date
and thereafter within 10 days of the annual
renewal date thereof, Tenant shall provide Landlord with certificates of insurance evidencing Tenant’s
insurance. Tenant also shall
provide Landlord with copies of such policies upon Landlord’s request.
24. Landlord’s Indemnity and Insurance. Subject to any
provision of this Lease that expressly limits Landlord’s liability and except for any matter arising
from any accident, injury, or damage
resulting from, or claimed to have resulted from, any grossly negligent/willful act or omission of Tenant,
(provided the same is proved
in a court of competent jurisdiction) or for any other matter that is Tenant’s obligation or responsibility as set forth in this
Lease. Landlord shall indemnify and hold Tenant harmless from and against all damages, losses or causes of action against Tenant to the
extent arising
from: (i) an injury to person or property in the Common Area, excluding the sidewalk in front of the Premises; and (ii)
any grossly negligent/willful act
or omission of Landlord, provided the same is proved in a court of competent jurisdiction. Landlord
shall maintain during the Term: (i) commercial
general liability insurance in an amount not less than [*****]
(including contractual liability coverage) covering bodily injury and property damage
liability; and, unless insured under a business
automobile policy, automobile ownership, non-ownership and hired car liability; (ii) workers
compensation insurance in such statutory
amounts as required by the State; and (iii) property insurance on a “special peril” broad form coverage basis
insuring the
Shopping Center and the improvements located thereon (except for Tenant’s fixtures and personal property) against loss or damage by fire
and such other risks as Landlord may elect, in the amount that Landlord deems sufficient to replace or reconstruct the buildings and
improvements
without deduction for physical depreciation (including resulting loss of rental income), and with such commercially reasonable
deductible amounts.
Landlord’s property coverage shall include earthquake and flood coverage if the Shopping Center is located in a jurisdiction
where Landlord’s
insurance includes such flood and/or earthquake coverages and where Landlord’s insurance providers recommend including
such coverage. Landlord’s
insurance also may include such other or additional insurance (as to risks covered, policy amounts, policy
provisions or otherwise) as Landlord deems
appropriate, including Pollution Liability Insurance. Landlord’s insurance may be provided
under a so-called “blanket” policy covering other shopping
centers owned by Landlord or Landlord’s affiliate.
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25. Waiver of Subrogation and Risk of Loss. Landlord and
Tenant hereby release each other and anyone claiming through or under the other by way of
subrogation from any and all liability for
any bodily injury or loss of or damage to property, whether or not caused by the negligence or fault of the
other party. In addition,
Landlord and Tenant shall cause each insurance policy carried by them to provide that the insurer waives all rights of recovery
by way
of subrogation against the other party hereto in connection with any loss or damage covered by the policy. Tenant shall store its property
at
Tenant’s own risk and releases Landlord, to the full extent permitted by law, from all property damage claims except to the
extent of Landlord’s gross
negligence or willful misconduct. Landlord shall not be responsible or liable to Tenant for any loss
or damage to Tenant’s property arising from any
cause except to the extent of Landlord’s gross negligence or willful misconduct.
26. Damage and Destruction. If the Premises is partially
damaged and/or destroyed by any casualty covered under Landlord’s insurance policy, Landlord
shall, upon receipt of the insurance proceeds
and the requisite permits/approvals, repair/restore the Premises to substantially the same condition as the
Premises were in on the Possession
Date. Landlord shall not be required to expend more than the proceeds of its insurance in repairing/restoring the
Premises so long as
Landlord carried the insurance required per Section 24.
If (i) the Premises suffers a Major
Casualty (as defined below), or (ii) the Premises is damaged/destroyed as a result of a risk not covered by Landlord’s
insurance
(so long as Landlord carried the insurance required by this Lease), or (iii) applicable laws, codes, or ordinances prohibit the repair/restoration
of the Premises to substantially the same condition as existed immediately before the casualty event, or (iv) 50% or more of the buildings
of the
Shopping Center within a 500’ radius of the Premises, including the building containing the Premises, suffers a Major Casualty
(regardless of whether
or not the Premises is damaged/destroyed), or (v) 50% or more of the gross leasable area of the Shopping Center
suffers a Major Casualty (regardless
of whether or not the Premises is damaged/destroyed), or (vi) Landlord determines, in Landlord’s
sole judgment, that the repair/restoration of the
Shopping Center to substantially the same condition as existed immediately before the
casualty event would not be economically viable, then, in any
one of such events described in (i) through (vi) above, Landlord may elect
either to repair/restore the Premises as provided for in Section 15.1 or
terminate this Lease by notice of termination given to Tenant
within 60 days after such casualty event. Tenant’s liability for Rent upon the termination
of this Lease shall cease upon later
of (y) the day of casualty event or (z) the date upon which Tenant involuntarily ceased to do business at the
Premises. As used herein
“Major Casualty” means damage and/or destruction that Landlord reasonably estimates will take at least six months to repair
and/or replace (exclusive of any permitting period).
Furthermore, in the event Landlord
elects to repair/restore the Premises following such casualty, then, Landlord shall promptly furnish to Tenant an
estimate of the time
necessary to perform such work as required hereunder. If such estimated period for completion of the repair and restoration of the
Premises
exceeds 270 days from the date of the casualty, Tenant may, within 30 days after Tenant’s receipt of the estimate, terminate this
Lease by
written notice to Landlord. If Tenant does not so terminate, this Lease (subject to the provisions set forth herein), shall remain
in effect unless the
actual restoration time differs from the estimate in which case, Tenant may terminate this Lease after such 270 day
period, but prior to Landlord’s
actual restoration completion.
Unless caused by Tenant’s gross
negligence or willful misconduct, if the Premises shall be damaged by a casualty, then Tenant shall have a
proportionate abatement of
Minimum Rent as to that portion of the Premises rendered untenantable retroactive to such casualty date provided,
however, if the Premises
is unusable due to such partial casualty, there shall be a total abatement of Minimum Rent and Additional Rent. If Landlord
elects to
repair the damage insured under Landlord’s policies, then any such rent abatement shall end upon the earlier to occur of (i) the 10th
day from
and including the date Landlord substantially completes such repair/restoration work, or (ii) the date Tenant re-opens the Premises
for business;
provided, however, Tenant shall promptly shall complete all work necessary for Tenant to re-open and operate Tenant’s
Permitted Use in the Premises.
All insurance proceeds received by Tenant shall be held in trust by Tenant for the performance of Tenant’s
work hereunder.
27. Eminent Domain. If the Premises shall be taken by
eminent domain, then the Term shall cease, and this Lease shall terminate on the date title vests in
the taking authority. Tenant shall
have no claim against Landlord for the value of any unexpired Term. If any part of the Premises or of the Shopping
Center shall be taken
by eminent domain, and if such partial taking shall render the Premises and/or the Shopping Center no longer suitable for
commercial
use as determined by Landlord in Landlord’s commercially reasonable judgment, then the Term shall cease and terminate as of the date
title vests in the taking authority. If Landlord does not terminate this Lease, then Landlord shall restore the Premises to substantially
the same condition
as the Premises were in on the Possession Date less the portion taken; and this Lease shall continue in full force
and effect. In connection with such
restoration, Landlord shall not be required to expend more than the award proceeds reserved for such
purpose. The Minimum Rent and Additional
Rent shall be reduced in the proportion that the area of the Premises taken bears to the original
Premises. Landlord shall receive the full amount of any
award made in connection with any condemnation or taking. If a portion of the
Premises is taken in amount affecting Tenant’s ability to use the
Premises for the Permitted Use in Tenant’s reasonable discretion,
Tenant may elect to terminate this Lease (effective on the date title vests in the taking
authority). Tenant shall cooperate with Landlord
in executing such waivers/releases as may be necessary for Landlord to recover the award. Tenant,
however, may seek recovery directly
from the condemning authority (and not from Landlord) for such compensation as may be separately awarded or
recoverable by Tenant in
Tenant’s own right under applicable law.
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28. Relocation. Intentionally deleted.
29. Shopping Center Redevelopment. Intentionally deleted.
30. Event of Default.
(a) Any one of the following shall be an “Event of Default”:
Tenant’s failure to pay any portion of the Rent within five days after Landlord has
delivered to Tenant written notice of such
default; Tenant’s failure to observe or perform any of the other terms, conditions, or covenants of this
Lease and to commence
and to cure the same within 30 days after Landlord has sent to Tenant written notice describing such default or such
longer period as
reasonably required so long as Tenant is diligently pursuing a cure; Tenant’s filing of a voluntary petition for relief under the
Bankruptcy Code or any similar federal or state law now or hereafter enacted; the commencement of any of the following proceedings that
is not
dismissed within 60 days: (i) Tenant being judicially declared bankrupt or insolvent according to law; (ii) an
assignment for the benefit of
creditors; (iii) a receiver, guardian, conservator, trustee in bankruptcy or other similar officer
being appointed to take charge of all or a substantial
part of Tenant’s property by a court of competent jurisdiction; and/or (iv) an
involuntary petition for relief being filed against Tenant pursuant to
the Bankruptcy Code or any similar federal or state law now or
hereafter enacted.
(b) Upon an Event of Default, Landlord may, in addition to Landlord’s
rights and remedies at law or in equity: declare this Lease terminated by giving
Tenant a written notice to quit on not less than five
days’ written notice; and/or without further demand, notice, or resort to legal process (except to
the extent required by law),
enter the Premises and repossess the same, expel Tenant and those claiming through or under Tenant, and remove,
dispose of, or store
(in a public warehouse or elsewhere at the cost and for the account of Tenant) Tenant’s personal property without liability for
any loss or damage that may be occasioned thereby. Landlord may recover from Tenant all damages it may incur by reason of Tenant’s
default,
including repair and maintenance expenses incurred to avoid waste and the Rent as it becomes due for the remainder of the Term
as if this Lease
had not been terminated or the Premises re-possessed; and without regard to whether Landlord has re-let the Premises
or not, except Tenant shall
be entitled to a credit in the amount of rent received by Landlord in reletting, after deducting all of Landlord’s
expenses incurred in reletting the
Premises (including, brokerage fees, repair costs, the remodeling costs to place the Premises in condition
acceptable to a new tenant), and in
collecting the rent in connection therewith. If the rentals received from such reletting are insufficient
to cover the total Rent due during that month,
Tenant shall pay such deficiency to Landlord. Tenant shall not be entitled to any offset
or credit for payments received by Landlord in excess of
the amounts due from Tenant hereunder, either on a monthly or cumulative basis.
Alternatively, Landlord may elect to recover from Tenant and
Tenant shall pay to Landlord liquidated damages in a lump sum payment equal
to the Rent reserved under this Lease for the balance of the Term
(discounted to its then present value) over and above the total fair
market rental value (discounted to its then present value) of the Premises for the
balance of the Term taking into account Landlord’s
reasonable projections of the time and cost to re-let the Premises. In calculating present value,
the parties shall use a discount rate
equal to two points above the Federal Reserve Bank’s discount rate.
(c) To the maximum extent permitted by applicable laws, Landlord
hereby waives any rights which Landlord may have, as to any of Tenant’s
furniture, fixtures, equipment, personal property, tenant
improvements and Alterations, in the nature of a Landlord’s lien, security interest or
otherwise and further waives the right to
enforce any such lien or security interest.
(d) Landlord and Tenant each waive trial by jury in any action
or proceeding brought by the other on any matter whatsoever arising out of or in any
way connected with this Lease. Tenant agrees not
to interpose any non-compulsory counterclaim of whatever nature or description in any action
commenced by Landlord for non-payment of
Rent; and submits to the jurisdiction of any court established to adjudicate such Landlord-Tenant
matters on a summary process basis.
(e) The prevailing party in any legal proceeding based on this
Lease may recover reasonable attorneys’ fees, investigation costs, and other costs
incurred in connection with such legal proceeding
from the non-prevailing party in addition to any other relief to which such prevailing party is
entitled. The term “prevailing
party” shall mean that party which the court finds and/or declares is the prevailing party, whether or not that party
obtains monetary,
declaratory, injunctive, equitable or nominal relief. With respect to any monetary claim, no award of damages shall be necessary
in order
for a party to be found by the court to have prevailed. With respect to any non-monetary claim, no equitable relief shall be necessary
in
order for a party to be found by the court to have prevailed.
(f)
Any release of Tenant from Tenant’s liability under
this Lease only may be made by a written agreement signed by an officer of Landlord
authorized to give such release. Any acceptance of
keys to the Premises by Landlord shall not constitute an acceptance of Tenant’s surrender.
Landlord’s termination of this
Lease or recovery of possession of the Premises shall not constitute an acceptance of any surrender and shall be
without prejudice to
any and all of Landlord’s rights and remedies under this Lease, at law or in equity, including, without limitation, the right to
recover damages.
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(g) No receipt of monies by Landlord from or for the account
of Tenant or from anyone in possession or occupancy of the Premises after the
termination of this Lease or after the giving of any notice
of termination shall reinstate, continue, or extend the Term or affect any notice given to
Tenant prior to the receipt of such money;
and Landlord’s acceptance of any payment or performance shall not be deemed a recognition of any
tenancy, revive this Lease, or
otherwise impair or prejudice Landlord’s right to recover the Premises. From and after the termination of this Lease
as provided
herein, the unilateral payment of Rent or performance by Tenant shall not create any tenancy, but rather, shall be, at Landlord’s
discretion,
deemed to be on account of Landlord’s damages or as use and occupancy payments during Tenant’s unlawful detainer of the Premises.
Tenant authorizes the online payment portal service provider, vendor, and/or Bank used by Tenant for the payment of Rent to release to
Landlord
copies of Tenant’s checks and/or other Rent payment information. If Landlord designates a bank or other third-party institution
to receive
payments of Rent, said designation shall not constitute the appointment of agency to act on behalf of or for Landlord. If
this Lease shall be
guaranteed on behalf of Tenant, all of the foregoing provisions hereof shall be deemed to read “Tenant or the
Guarantor hereof”. Nothing
contained herein shall prevent the enforcement of any claim Landlord may have against Tenant for anticipatory
breach of this Lease. In the event
of breach or anticipatory breach by Tenant of any provision of this Lease, Landlord shall have the
right of injunction as if other remedies were not
provided for herein.
(h) If Landlord fails to perform its obligations under this Lease,
Tenant shall deliver written notice to Landlord specifying the nature of Landlord’s
failure to perform and, if Landlord fails to perform
its obligations within 20 days or such longer time as may be necessary (provided Landlord is
using reasonable efforts), after receipt
of said notice and Tenant provides a second written notice to Landlord, which specifically references this
Section of this Lease and
notifies Landlord of Tenant’s intent to exercise self-help after the expiration of 10 days from Landlord’s receipt of the
second notice,
and Landlord still fails to perform its obligations within said 10 day period, then Tenant, as its sole and exclusive remedy, shall
have
the right to perform Landlord’s obligations under this Lease. In no event, however, shall Tenant have any self-help remedies with respect
to
the roof, including snow removal therefrom. If Tenant exercises its self-help remedy as provided herein, then Landlord shall reimburse
Tenant for
Tenant’s reasonable out-of-pocket expenses to perform Landlord’s obligations, within 30 days after receipt of Tenant’s written
request, which
request shall include receipted invoices and lien waivers from all suppliers and contractors. If Landlord fails to reimburse
Tenant within the 30-day
period, Tenant may deduct said reasonable expense from the next installments of Rent until Tenant is fully reimbursed.
Tenant’s self-help rights
are in lieu of any right to terminate this Lease that may be provided by law, which claim/right Tenant waives.
31. Lease Priority. This Lease is or shall be subject
and subordinate to all matters of record, including any mortgage, deed of trust, ground lease, or any
other method of financing or refinancing
now or hereafter placed against the Premises and/or the Shopping Center (or any portion thereof) by
Landlord, and to any and all advances
made or to be made thereunder and to the interest thereon and to all renewals, replacements, consolidations and
extensions thereof. In
confirmation of such subordination, Tenant shall execute any reasonable acknowledgment that Landlord may request. The holder
of any mortgage
or deed of trust may elect to have this Lease superior to its mortgage or deed of trust upon notice to Tenant. Landlord represents and
warrants to Tenant that as of the date hereof the Shopping Center is unencumbered.
32. Quiet Enjoyment. Upon paying Rent and performing all
of Tenant’s other covenants and obligations under this Lease, Tenant shall peaceably and
quietly enjoy the Premises without hindrance
or interruption by Landlord subject to the terms of this Lease and to any mortgage, ground lease, or other
agreements, covenants, and
restrictions to which this Lease is subordinated.
33. Notice. All notices required or permitted to be given
under this Lease shall be deemed to have been given and received if: (i) sent through a nationally
recognized overnight delivery
service (e.g., FedEx) on the day after being picked-up by said carrier; or (ii) sent by United States Certified mail,
postage prepaid, three days after being deposited in the mail. All notices shall be in writing and sent to the address set forth in Section 1.
Notwithstanding the designation of a separate rent payment address, only notice sent to the notice address set forth in Section 1
shall be good and
sufficient notice under this Lease. Any party, by proper notice to the other, may change such party’s address
for the giving of notice under this Lease.
34. Lease Interpretation. The term “includes”
and “including” are not limiting. The term “person” includes
any natural person and/or any organization or
entity. The word “or” may be inclusive
or exclusive depending upon the context of the provision. The word “Tenant” shall mean each and every person
identified as a tenant herein; and if there shall be more than one tenant, the liability of each shall be individual, joint and several.
All exhibits, riders,
and/or addenda attached to this Lease are made a part hereof as if fully incorporated into the body of this Lease.
Each party has had the opportunity to
review and revise this Lease and retain legal counsel; and any applicable rule of construction
that any ambiguities are resolved against the drafting
party shall not be applicable in the interpretation of this Lease. The numbering
and headings throughout this Lease are for reference only, and shall not
be used to construe, interpret, or explain the provision. Whenever
an example is given in this Lease, such example shall be construed to be by way of
example only and not of limitation. The
singular includes the plural. The use of the neuter singular pronoun to refer to Landlord or Tenant shall be
deemed a proper reference
even though Landlord or Tenant may be an individual and/or an organization or entity. The necessary grammatical changes
required to make
the provisions apply in the plural or to be gender appropriate shall in all instances be assumed as if correctly expressed. Landlord’s
and Tenant’s relationship is that of Landlord and Tenant; and not as partners or joint venturers. Each provision to be performed
by Tenant shall be
construed to be both a covenant and a condition. The rights and covenants conveyed in this Lease shall not be deemed
to be covenants running with the
land.
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35. Force Majeure. Landlord’s and Tenant’s
time to perform any obligation under this Lease shall be extended for the period of any unavoidable delay in
the performance of any obligations
hereunder when prevented from doing so by a cause or a condition beyond such party’s control, including, labor
disputes, riots,
civil commotion, war, war-like operations, invasion, rebellion, hostilities, military or usurped power, terrorist action, sabotage,
Government
ordered business closure, stop work order (for reasons/causes other than such party’s failure to comply with applicable law/legal
requirements), or other regulation, fire or other casualty, inability to obtain any necessary material, services or financing, or through
acts of God.
Notwithstanding the foregoing, no cause or event shall release Tenant from, or permit a delay in, excuse, or otherwise extend,
the timely payment of
Rent as such becomes due.
Notwithstanding anything in this Lease
to the contrary, in the event any Governmental Shutdown Order (as defined below) continues for a period of
more than 30 days, Tenant shall
have the onetime right at any time during the Governmental Shutdown Order, upon prior advance written notice to
Landlord, to defer the
payment of Minimum Rent (“Deferred Base Rent”) until the Governmental Shutdown Order is lifted, for a maximum period
of
90 days (the “Deferral Period”). The Deferred Base Rent does not include additional rental payments due under the
Lease (e.g., real estate taxes,
insurance, and common area charges) or utility charges which in both cases shall continue to be paid by
Tenant pursuant to the terms of Lease
(“Current Monthly Additional Rent Payment”). Tenant agrees to pay the Deferred
Base Rent under the Lease to Landlord in six equal monthly
installments (each a “Deferred Rent Payment”) on the first
day of each month, commencing on the 90th day following the expiration of the Deferral
Period and ending until paid in full.
Notwithstanding Landlord’s agreement to forbear on the collection of the Deferred Base Rent, the Deferred Base
Rent remains rental
that was due for the Deferral Period and shall remain a rental obligation under the Lease. Tenant agrees to pay each Deferred Rent
Payment
to Landlord on the monthly payment dates set forth above in addition to Tenant’s regular monthly payments of rentals due under the
Lease for
such month. Tenant will not be charged interest on the unpaid Deferred Base Rent during such 6-month period. As of the
effective date of this Lease,
each party acknowledges and agrees that a Governmental Shutdown Order is not currently in place. For purposes
of this paragraph, a Governmental
Shutdown Order shall mean an order of a governmental authority having jurisdiction over the Shopping
Center that requires the Tenant to cease the
operation of its business.
In the event of any default or breach
in the payment of any Deferred Base Rent Payment, or Current Monthly Additional Rent Payment as provided
herein, Landlord shall have the
immediate right to accelerate the obligation to pay, and require the immediate repayment of, the full balance of all
unpaid Deferred Base
Rent with respect to the Lease, without further notice or cure period, of any nature, or demand to Tenant and to the extent not
paid by
Tenant, then Landlord may thereafter exercise any and all other rights or remedies for a rental/payment default as set forth in the Lease.
Further, Tenant’s failure with respect to any Lease to timely pay any Deferred Rent Payment and/or Current Monthly Additional Rent
Payment to
Landlord in accordance with this Lease shall constitute a monetary/rent default and breach under the Lease with respect to
which Tenant failed to
timely make such Current Monthly Additional Rent Payment or Deferred Base Rent Payment and giving rise to Landlord’s
right to exercise any and all
of its rights or remedies under such Lease or the laws of the state in which the leased premises is situated
with respect to such monetary/rent default. In
case of breach by Tenant of any covenants or undertakings of Tenant under the Lease, Landlord
nevertheless may accept from Tenant any payment
without in any way waiving Landlord’s right to exercise the rights provided in the
Lease by reason of any other breach or lapse which was in existence
at the time such payment or payments were accepted by Landlord.
36. Partial Invalidity. If any provision of this Lease
shall to any extent be invalid, the remainder of this Lease shall not be affected thereby; and each other
provision of this Lease shall
be valid and enforced to the full extent permitted by law.
37. Estoppel Certificate. Tenant shall, within 15 days
after a request from Landlord, execute and deliver a certificate certifying (to the extent true): (i) that
this Lease is in full
force and effect; (ii) a statement of the Possession Date, Rent Commencement Date, and Expiration Date; (iii) that Landlord
is not
then in default of this Lease; and (iv) such other matters as customarily are included in such certificates as may be reasonably
requested by Landlord.
Any such certificate may be relied upon by Landlord, any successor of Landlord, any mortgagee of Landlord, or
any purchaser of the Shopping Center.
38. Waiver and Consent. The rights and remedies given
to Landlord and Tenant in this Lease are distinct, separate, and cumulative; and the exercise of any
of them shall not be deemed to exclude
either party’s right to exercise any of the others. The waiver by Landlord or Tenant of any breach shall not be
deemed to be a
waiver of any subsequent breach of the same or any other term, covenant, or condition of this Lease, or of such party’s right to
enforce
the same in the future. The acceptance of Rent by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
regardless of
Landlord’s knowledge of such breach. No covenant, term or condition of this Lease shall be deemed to have been waived by
Landlord or Tenant unless
such waiver be in writing. No waiver by Landlord in respect to other tenants shall be deemed to constitute
a waiver in favor of Tenant. Whenever
Landlord’s consent is required under this Lease, such consent may be withheld by Landlord
in Landlord’s sole discretion unless a different standard
expressly is stated. If a court finds that Landlord wrongfully withheld
its consent, the sole result of such finding shall be Landlord’s deemed consent to
the requested matter and Landlord shall not
be liable to Tenant for any damages arising from the withholding of any consent.
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39. Recovery. If Landlord is found liable or obligated
to Tenant for any reason under this Lease, then Landlord shall be liable to Tenant only for Tenant’s
actual, direct damages; and
in no event shall Landlord be liable to Tenant for lost sales or profits or any indirect, speculative, punitive, or consequential
damages.
Tenant shall look solely to the estate and property of Landlord in the Shopping Center. If Tenant is found liable or obligated to Landlord
for
any reason under this Lease, then Tenant shall be liable to Landlord only for Landlord’s actual, direct damages; and in no
event shall Tenant be liable
to Landlord for lost sales or profits or any indirect, speculative, punitive, or consequential damages.
40. Successors. All rights and liabilities herein given
to, or imposed upon, Landlord and Tenant shall extend to and bind the respective heirs, executors,
administrators, successors, and assigns.
No rights, however, shall inure to any assignee of Tenant made in violation of Section 22.
In the event of any
sale or transfer of Landlord’s interest in the Shopping Center, the Premises, or this Lease (except as collateral
security for a loan), upon such transfer
and assumption by the assignee, Landlord will be released from all liability and obligations
hereunder from and after the date of the assignee’s
assumption of this Lease.
41. Confidentiality. Except to the extent required by
law, including by subpoena, Tenant shall not disclose the terms and conditions of this Lease to anyone
except for Tenant’s attorneys,
accountants, brokers, employees and existing or prospective financial partners. Notwithstanding anything to the contrary
herein, Landlord
and Tenant shall each have the right to make disclosures of the terms of this Lease (a) to the extent required by legal requirements,
(b)
to the extent reasonably required to enforce such party’s rights hereunder, (c) to the extent reasonably necessary in connection
with such party’s
financing, selling, leasing, or otherwise transferring or capitalizing its assets or its business (or any such
transaction consummated by such party’s
affiliate) (including, without limitation, disclosures that are reasonably necessary to
comply with rules of the Securities and Exchange Commission or
any stock exchange), (d) to the extent reasonably required in connection
with such party’s books and records being audited, (e) to the extent reasonably
required in constructing, operating, maintaining,
repairing or restoring the Premises or the other portions of the Shopping Center, and (f) pursuant to a
press release which has been
approved by both parties.
(a) Landlord acknowledges and agrees that from time to time during
the Term, Landlord, its representatives or assigns may be exposed to, or have
access to, sensitive personal information related to Tenant’s
donors. To protect such personal information, Tenant shall have the right to restrict
access to the portions of the Premises where donor
records and other personal information are kept or stored. Landlord hereby agrees that,
notwithstanding the rights granted to Landlord
under this Lease, except when accompanied by an authorized representative of Tenant, neither
Landlord nor its employees, agents, representatives
or contractors shall be permitted to enter those areas of the Premises designated by Tenant as
locations where sensitive donor records
and other personal information are kept and/or stored. Landlord agrees that it will not use or disclose any
such personal information
for any purpose unless required by a court of competent jurisdiction or a governmental authority.
(b) Landlord shall preserve any Confidential Information of or
pertaining to Tenant and shall not, without first obtaining Tenant’s prior written
consent, disclose to any person or organization,
or use for its own benefit, any Confidential Information of or pertaining to Tenant during and after
the Term, unless such Confidential
Information is required to be disclosed by a court of competent jurisdiction or by any governmental authority.
As used herein, the term
“Confidential Information” shall mean any business, financial, personal or technical information relating to the business
or other activities of Tenant that Landlord obtains in connection with this Lease.
15
42. REIT Qualification. Tenant shall cooperate with Landlord,
at Landlord’s cost, so that the Rent under this Lease continues to qualify as “rents from real
property” as defined
in Section 856(d) of the Internal Revenue Code and related Treasury Regulations. Such cooperation includes amending this Lease
as
necessary provided there is no increase in Tenant’s financial obligations to Landlord nor change in Tenant’s Permitted Use.
43. End of Term. At the Expiration Date or sooner termination
of this Lease, Tenant shall quit and surrender the Premises in broom clean condition,
reasonable wear and tear and casualty excepted.
Tenant will perform repairs, if any are required, so that the HVAC, electrical, and plumbing systems
serving the Premises are in the
condition required by this Lease. Tenant shall remove all of Tenant’s signs, inventory, furniture, trade fixtures,
equipment, and
other personal property from the Premises in a careful and prudent manner; and repair any damage caused thereby. All property
remaining
in the Premises on or after the Expiration Date (or sooner termination date) shall become the property of Landlord without payment from
Landlord. Tenant shall be liable for the cost of removal and other charges to dispose of, or at Landlord’s option, to store such
property. If Tenant fails to
vacate the Premises in condition required by this Section, then such hold-over shall be a tenancy-at-sufferance
only. For each day Tenant holds-over,
Tenant shall pay to Landlord a use/occupancy charge equal to [*****]
of the annual Minimum Rent payable as of the Expiration Date plus all
Additional Rent (annualized based upon Tenant’s then-current
payments) divided by 360. In addition, and without prejudice to all of Landlord’s rights
and remedies at law or in equity
against Tenant, Tenant shall indemnify Landlord against any loss or liability resulting from Tenant’s delay in
surrendering the
Premises on the Expiration Date (or sooner termination date). Tenant’s obligation to observe or perform the covenants contained
in
this Section shall survive the expiration or earlier termination of the Term.
44. Entire Agreement. Landlord and Tenant represent and
warrant to each other that their respective signatories are authorized to sign this Lease on such
party’s behalf. This Lease and
the exhibits, riders, and/or addenda attached hereto, if any, set forth the parties’ entire agreement. All negotiations,
representations,
and understandings between the parties are merged, incorporated into, and set forth in this Lease. This Lease may be
modified/amended
only by written agreement of the parties. In entering into this Lease, each party represents and warrants to the other that it is not
relying upon any statement, opinion, or representation made by the other party except as expressly set forth in this Lease. This Lease
may be executed
in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute a single
document. The execution of
this Lease by digital signature (e.g., stylus/pen, digital image, or digital signature (e.g.,
DocuSign®)) and/or delivery by electronic means (e.g., email,
facsimile, DocuSign shall be valid and binding as between the
parties for all purposes under this Lease and applicable law and rules of evidence with
the same force and effect as if the parties had
exchanged original executed documents by hand. If required, each party shall take such curative action
required to remedy any defect
in the execution and delivery of this Lease. Once executed by both parties, this Lease shall be effective and binding as of
the Effective
Date; and all terms, conditions, and provisions herein shall be binding upon and shall inure to the benefit of the parties, their legal
representatives, successors, and assigns. Tenant shall not record this Lease or any memorandum thereof.
16
IN WITNESS WHEREOF,
the parties have executed this Lease as of the day and year first above written.
LANDLORD:
BRIXMOR HOLDINGS 12 SPE, LLC,
a Delaware limited liability company
By:
Brian Finnegan
Executive Vice President, Chief Revenue Officer
TENANT:
KAMADA PLASMA, LLC,
a Delaware limited liability company
By:
Name:
Title:
Date:
17
EXHIBIT A: SITE PLAN
NORTHSHORE WEST
[****]
18
EXHIBIT B: LANDLORD’S WORK
All work to be performed by Landlord in order
to prepare the Premises for Tenant’s occupancy (hereinafter (“Landlord’s Work”) is as follows and shall be
performed
prior to the Possession Date:
Landlord shall deliver the
Premises free from all Hazardous Materials including, but not limited to, the following: 1) remediate asbestos
and/or lead paint, and
mitigate any mold, PCB’s or any other hazardous materials as required by law within the Premises prior to delivery
of the Premises
to Tenant; 2) provide the Common Areas with lighting per Code, and ADA compliance per TDLR related to path for
travel from the Premises
to designated accessibility parking stalls, as well as path of travel from the Premises to the public right of way;
and 3) perform those
items listed on Exhibit B-1 attached hereto. Landlord shall provide Tenant with an ACM survey and closure report,
if applicable.
Landlord shall perform Landlord’s Work at
Landlord’s sole cost and expense.
19
EXHIBIT B-1: LANDLORD’S WORK LETTER
Landlord shall provide (at its sole cost) all
of the following improvements in the Premises per applicable Code and Tenant’s approved plans.
●
LANDLORD’S DEMOLITION WORK:
○
Landlord shall remove and dispose of any/all previous tenant installations including roof top equipment, furniture, trade fixtures,
equipment, interior partitions, floor coverings, ceilings, lighting, fixtures, equipment, vents, satellite dishes and other systems or
components thereof that will not be reused by Tenant pursuant to Tenant’s Final Plans, delivering the Premises in broom clean condition.
○
Please leave all HVAC components in place and working. Due to long lead times, Tenant may use these items temporarily until they have
a chance to replace with new.
●
ROOF:
○
Furnish and install watertight, insulated and structurally sound (capable of supporting all Tenant loads
above and below structure) roof
system with all applicable warranties in effect.
●
ROOF ACCESS:
○
Tenant, at Tenant’s sole cost, to install roof access ladder inside the space.
●
CEILING:
○
Provide an open structure above.
●
REAR EXIT DOOR:
○
AS-IS.
●
VEHICLE DELIVERY ACCESS:
○
AS-IS.
●
FLOOR:
○
The Construction Allowance (defined below) includes the amount of [*****]/sf in order for Tenant to complete
this item (i.e., slab work).
●
ELECTRICAL:
○
AS-IS.
20
●
WATER:
○
AS-IS.
●
GAS:
○
AS-IS.
●
SEWER:
○
AS-IS.
●
IMPACT FEES:
○
Shall be borne by the Tenant if applicable.
●
SPRINKLER:
○
The Construction Allowance includes the amount of [*****]/sf for Tenant to complete this work (i.e., installation
of a sprinkler system).
●
TRASH/RECYCLING:
○
Provide a clean, well-lit area for a code compliant trash enclosure for Tenant’s use. Enclosure
and surrounding pad to meet all applicable
codes for access and requirements of the waste and recycling removal service company. Existing
to remain.
●
BUILDING ENVELOPE:
○
Landlord shall deliver structurally sound and watertight.
21
EXHIBIT C: PYLON SIGN
[*****]
22
EXHIBIT D
CRITICAL VENDORS
[*****]
23
EXHIBIT E: SHOPPING
CENTER EXCLUSIVES AND RESTRICTIONS
[*****]
24
SIGN CRITERIA
FOR BRIXMOR PROPERTIES
Sign Criteria – New Lease & Renewals
Sign submissions should be sent to your property
manager for review and approval.
The design and location of all signs must
be approved in writing by Landlord and shall be subject to Landlord’s sole discretion as to design, size
and location. Tenant shall
submit sign working drawings to Landlord. No sign shall be installed until Landlord’s written approval has been
obtained by
Tenant. The working drawings must indicate the following:
a)
The
type and sizes of all lettering.
b)
Elevation
view of storefront showing sign (drawn to accurate scale) with dimensions of height of letters and length of sign.
c)
A
section through the sign showing its construction.
d)
Colors,
finishes and types of all materials.
e)
Wattage
and light intensity.
f)
Location
of all penetrations for conduit and sleeves, etc. required for sign installation.
Banners and window graphics are prohibited
unless approved in writing by Landlord. Banners, if approved, may remain up for no more
than 30 days. This includes “Coming
Soon,” “Now Hiring,” and “Now Open,” banners. Banners must be secured at all 4 corners and remain level
and taut. Tenant is responsible for repairs to the building or façade due to damaged caused by any banner installation.
Prohibited signs:
Moving Signs
Vehicles that advertise a business
free standing
Any item placed in common areas
portable signs
Flags
human signs “twirlers”
Bandit/Stake signs
Neon or LED rope lights
Searchlights
Flashing
Inflatables
Roof Mounted
The sign contractor and tenant shall be
held liable and shall bear all cost for removal and or correction of signs, sign installation and damage by
signs that do not conform
to the sign criteria as set forth in these Sign Criteria and the approved sign drawings. The sign contractor and Tenant
shall also be
liable for repairs of any damage caused by installation of Tenants sign.
25
EXHIBIT
F
SIGN CRITERIA
FOR BRIXMOR PROPERTIES
Criteria:
1.
Only
signs that have individual interior-lighted letters, carry Underwriters Laboratory (UL) rating, use a photo cell for power, and have
an
exterior on / off switch will be permitted. Signs with exposed neon tubing or exposed lamps or any exposed sign illumination or illuminated
sign cabinets or modules or “box” signs or signs of the flashing, rotating, moving, blinking or animated type are not permitted.
2.
Sign
drawings must include a photo of the actual building exterior or rendering with the proposed sign superimposed on the building. Tenant’s
sign company shall field verify all measurements.
3.
Drawing
must include the dimensions of the proposed sign and the dimensions of the building façade / exterior where sign will be placed.
4.
The
style and font of all letters on Tenants signs must be approved by Landlord prior to installation.
5.
Logos,
insignias, crests, brand names, shields, etc. are at Landlords sole discretion. Some centers do not allow colored letters or logos.
6.
Signs
shall be controlled by Tenants photocell and shall be timed to go off at dawn and on at dusk. Tenants sign may not be controlled solely
by a time clock.
7.
No
labels will be permitted on the exposed surface of the signs except those required by local ordinance which shall be applied in an
inconspicuous
location.
8.
All
signs must be in the English language unless approved by the Landlord.
9.
Box,
can and some raceway sign (select markets) mountings are prohibited.
10. Tenant
must have a permanent sign installed no later than sixty (60) days after their opening date. Landlord shall have the right to fine Tenant
[*****] per day for any missing building signage.
11. Tenant
agrees to keep all signage in good working condition. If any letters fade, peel and or are damaged, Tenant agrees to replace the sign
at
their sole cost. If Tenant fails to maintain any part of their signage, Landlord shall have the right to repair or replace the signage
and bill the
tenant. If Landlord notifies the Tenant of a defect and Tenant fails to make the repair within 30 days after receiving notice,
the Landlord shall
have the right to make the repair and bill the Tenant for the cost plus a [*****]
admin fee.
26
EXHIBIT
F
SIGN CRITERIA
FOR BRIXMOR PROPERTIES
Graphics:
1.
Maximum horizontal length or span of sign shall not exceed 80% of the width
of the usable storefront. Storefront width applies to one (1)
surface material. If the width of the storefront contains more than one
building/façade material, the Tenant shall use only one building/façade
material width to determine 80%. No sign may cover two different façade surfaces.
2.
The
sign shall be centered on the assigned surface at Landlords discretion.
3.
Minimum
stroke of letters shall be 2”.
4.
Signs
shall consist of individual illuminated channel letters with a 5” return, mounted on a 2” x 7” wire way.
5.
For
premises smaller than 3,000 sf Tenants must use letters 24” in height.
6.
For
premises larger than 3,000 sf, letters must be a minimum of 24” in height and shall not exceed 36” in height.
Sign Construction
1.
Border
/ Backing Plate / Silhouette: All signs shall utilize a 3” border around all sign copy fabricated and installed as per the attached
Exhibit
F-1.
●
Color: Dark Bronze #313
●
The wire way / raceway must not be visible from the front
of the sign.
2.
Acrylic
Faces:
●
3/16” minimum thickness
●
Color: Plexiglas White – 7328 (Rohm & Haas)
3.
LED
●
One row of LED modules for letters less than 4”; two
rows of LED modules for stroke 4” or more, but less than 9”, three rows of LED
modules for 9” or more
●
Color: 6400k LED White
4.
Sign
Mounting
●
The letters should be flush mounted on the 2“x7”
wire way as per the attached exhibit F-1; color of wire way shall match the color of the
fascia.
●
One (1) sign permitted per storefront façade.
5.
Return
●
Aluminum
●
Finish: Industrialized Enamel
●
Color: Dark Bronze #313
●
Mounted flush to the wire way per the attached Exhibit F-1
●
Color of trim cap connecting acrylic face to match color
of the return, Dark Bronze #313.
●
Backing / back plate / silhouette – should all be the
same color as the return.
6.
Transformers
●
Located behind the fascia per the attached Exhibit F-1
●
60 MA minimum
27
EXHIBIT
F
SIGN CRITERIA
FOR BRIXMOR PROPERTIES
[*****]
28
RIDER
This sets forth the Rider to the within Lease
by and between BRIXMOR HOLDINGS 12 SPE, LLC, a Delaware limited liability company and
KAMADA PLASMA, LLC, a Delaware limited
liability company d/b/a Kamada Plasma, for certain premises located at the Northshore West in Houston,
Texas; and is made a part of the
Lease as if fully incorporated into the body thereof.
45. Option to Extend the Term. Provided no Event of Default
exists, then Tenant may elect to extend the term of this Lease for two consecutive periods of
60 months each, exercisable by delivering
written notice to Landlord no later than 180 days before the expiration of the Term (or then-current Option
Term, as the case may
be); the time for delivery of such notice being of the essence. The option terms shall be on the same terms provided in this Lease
(except
for obligations that have been performed or provisions that no longer are applicable). Tenant shall exercise Tenant’s options,
if at all, by
serving written notice upon Landlord within the time specified above and otherwise in accordance with this Lease. If Tenant
does not timely exercise
Tenant’s option within the time set forth above, then such option automatically shall expire.
46. Exclusive Use. Provided Tenant is open and operating
the Premises for the Permitted Use and is not otherwise in default of this Lease beyond any
applicable notice and grace period, Landlord
agrees not to lease any other space in the Shopping Center for the principal business of a blood plasma
donation center. This exclusive
shall not apply to: (i) any leases, licenses, or other occupancy agreements existing as of the Effective Date, nor to any
renewals,
extensions, relocations, or expansions thereof/under such leases (collectively, “Existing Leases”) provided, however,
that if Landlord has
such discretion, Landlord shall not consent to any change in use that would violate Tenant’s exclusive hereunder;
(ii) any occupant of the Shopping
Center, including their predecessors, successors, assigns, and/or subtenants, under any Existing
Lease; or (iii) any replacement tenant (meaning an
occupant using space for substantially the same use as under an Existing Lease
even though the tenant entity or location in the Shopping Center may be
different). If any premises (other than the Premises) shall be
leased in violation hereof, Tenant shall notify Landlord in writing of such violation, and if
such violation is not remedied within 60 days
of Tenant’s notice, then Tenant thereafter shall have an abatement of 50% of the Minimum Rent payable
hereunder commencing
at the end of said 60 day period and continuing through the first anniversary of such date (the “Abatement Period”),
which
shall be Tenant’s sole and exclusive remedy. If the exclusive violation shall be remedied at any time prior to the expiration
of the Abatement Period,
then the Minimum Rent abatement granted hereunder shall cease as of such date; and Tenant shall resume the payment
of the full Minimum Rent from
that date forward. At the end of the Abatement Period, if the violation has not been remedied, Tenant may
elect to either terminate this Lease or resume
payment of the full Minimum Rent under this Lease. In the interest of clarity, Tenant
shall continue to pay all Additional Rent payable hereunder
during the Abatement Period. This Section shall be of no further force or
effect in the event (i) any action or proceeding is commenced against
Landlord under a federal or state anti-trust law or similar statute
based on the foregoing restriction, or (ii) the restriction is held to be invalid or illegal
by any court, statute or agency or
is deemed to be contrary to public policy. Landlord further covenants that any lease, deed or other agreement
hereafter executed by Landlord
affecting the Shopping Center, will be subject to Tenant’s exclusive use.
47. Construction Allowance. Landlord shall reimburse Tenant
up to [*****] (“Construction Allowance”) for the cost to build-out the Premises and install
the leasehold improvements.
Landlord shall pay Tenant the Construction Allowance within 30 days after receipt of Tenant’s written request for
payment,
which request may not be delivered any sooner than the date Tenant has opened for the business in the Premises under the Trade Name and
paid the first month’s Rent (excluding any rent deposit made hereunder). Tenant’s application shall include the following:
(i)
final/unconditional releases or lien waivers from Tenant’s
general contractor, subcontractors, and suppliers on the form required by law;
(ii)
a sworn affidavit from Tenant’s general contractor identifying
all subcontractors and suppliers and the amounts owed and paid to each;
(iii)
Tenant’s general contractor’s Application for
Payment on an AIA form and Lien Waiver on the form required by law;
(iv)
Tenant’s Subcontractors’/Materialmen’s Application for
Payment and Lien Waiver (to be submitted for each subcontractor or supplier whose
contracts/requisitions exceed [*****] on an AIA form
or such other form required by law);
(v)
Architect’s Certificate of Substantial Completion (if
applicable) on an AIA form or such other form approved by Landlord;
(vi)
Certificate of Occupancy (temporary as applicable);
(vii) a set of as-built drawings of the Premises in CAD file format;
(viii) Tenant’s Form W-9; and
(ix)
a letter from the TDLR indicating compliance with the Texas
Architectural Barriers Act, Article 9102, Texas Civil Statutes (for purposes
hereof, compliance means that either no violations
exist or that any violations have been remedied to the satisfaction of the TDLR).
29
Tenant shall supply either originals
or counterparts of the foregoing documents. Tenant shall submit Tenant’s application for payment to: Tenant
Allowance Coordinator,
Brixmor Property Group, 200 Ridge Pike, Suite 100, Conshohocken, PA 19428. (To expedite, Tenant may submit Tenant’s
request via email to tacoordinator@brixmor.com provided Tenant follows-up said email with a hard copy via U.S. Mail or overnight
carrier service.)
Tenant shall provide such additional evidence as Landlord may reasonably request in support of Tenant’s costs.
Recognizing Landlord’s need to close
timely Landlord’s financial books and records, if Tenant has not satisfied all the conditions
for payment of the Construction Allowance by the 365th
day from the Rent Commencement Date then, as of such day, Tenant waives
any and all rights to the payment of the Construction Allowance. If Tenant
is in default of this Lease beyond applicable notice and cure
periods, then Landlord may withhold payment of the Construction Allowance until such
time as Tenant cures the default or Landlord accepts
Tenant’s cure. Prior to the payment of the Construction Allowance, if Landlord has terminated this
Lease due to an Event of Default
by Tenant, then Landlord’s obligation to pay Tenant the Construction Allowance also shall terminate. If Tenant shall
be a debtor
in bankruptcy under the United States Bankruptcy Code, 11 U.S.C. §§ 101-1330 (the “Bankruptcy Code”),
then Landlord may defer
payment of any Construction Allowance until after such time as the United States Bankruptcy Court has approved
Tenant’s assumption of this Lease
on a final and non-appealable basis. Landlord shall be the legal title and beneficial owner of
all improvements that are acquired with or funded by the
Construction Allowance. Each party shall prepare its federal, state and local
income tax forms and schedules, and calculate taxable income, in a
manner consistent with Landlord’s ownership of such improvements
for all taxable years. Any question as to whether a cost qualifies as reimbursable
leasehold improvement shall be governed by the Internal
Revenue Code, the related IRS regulations, applicable case law, and Internal Revenue Service
guidance. The provisions of this Section
shall survive the termination of this Lease.
48. Waiver of Texas Deceptive Trade Practices Act. Tenant
hereby waives all its rights under the Texas Deceptive Trade Practices-Consumer Protection
Act, Section 17.41 et. seq. of
the Texas Business and Commerce Code, a law that gives consumers special rights and protections. After consultation
with an attorney
of Tenant’s own selections, Tenant voluntarily consents to this waiver.
49. Intentionally deleted.
50. Medical Provisions.
(a) Installation, Insulation, and Filtering For Electronic,
Electromagnetic, and X-Ray Machines. No X-ray machines or other electrical or electronic or
electromagnetic or other similar or dissimilar
medical equipment or machines or devices now existing or hereafter invented shall be installed or
used in the Premises unless installed
completely at Tenant’s sole cost and expense, in accordance with all the terms and conditions of this Lease,
including, without limitation,
rules and regulations and requirements of the local board of fire underwriters, the local fire insurance exchange and
all federal, state
and municipal governmental and quasi-governmental authorities having jurisdiction thereof, and, not unless the same is properly
electrically
filtered and insulated so that there is no interference in the Premises with telephonic, video, fiber optic, data processing, radio,
television or other similar or dissimilar communication, transmission or reception whether now existing or hereafter invented. All walls,
ceilings,
floors and doors of any room used for examination, diagnosis, testing, or therapy shall be properly shielded and shall comply
with all rules,
regulations, ordinances and other requirements from time to time in effect whether now or in the future of any and all
Federal, State and Municipal
authorities having jurisdiction thereof.
(b) Disturbance of Other Tenants. Tenant covenants and
agrees not to suffer, allow or permit any offensive or obnoxious vibration, noise, odor or other
undesirable effect to emanate from the
Premises, or any machine or other installation therein, or otherwise suffer, allow or permit the same to
constitute a disturbance to
occupants of the building.
(c) Electrical and Plumbing System. Tenant covenants and
agrees that Tenant’s medical equipment does not need extraordinarily high voltage and the
existing electrical system will be sufficient
voltage for its equipment. Tenant further covenants and agrees that Tenant’s medical equipment does
not need special plumbing requirements
and the existing plumbing system will not overburden Landlord’s plumbing system capacity.
(d) Installation of Heavy Equipment. Tenant shall not
install in the Premises any heavy equipment (i.e., x-ray machines) without written consent from
Landlord.
(e) Medical Waste. Tenant covenants and agrees that the
storage, handling, removal and disposal of all medical waste matter at or from the Premises
shall be done in compliance with all applicable
laws and/or legal requirements now or hereafter existing and shall be performed by Tenant at
Tenant’s sole cost and expense.
30
(f)
Additional Liability Insurance. Tenant shall carry
liability insurance that covers claims resulting from medical waste storage or disposal naming
Landlord, its affiliates and/or managers
as additional insured. Tenant shall also carry employer’s liability insurance naming Landlord, its affiliates
and/or managers as additional
insured.
(g) Medical License. Tenant represents that it is and
will, at all times during the Lease Term, be licensed to conduct the business contemplated and
carried on in the Premises pursuant to
the Permitted Use and Tenant agrees to maintain at all times, at its sole cost and expense, all requisite
permits and/or licenses in
connection therewith.
51. Right to Pledge. Notwithstanding anything to the contrary,
Tenant shall have the right to pledge its leasehold interest and any of Tenant’s property that
is provided or financed by a third-party
lender or vendor holding a purchase money lien on such property and Landlord agrees to promptly execute
such documents as may reasonably
be requested from any such third-party lender or vendor to evidence Landlord’s waiver of its lien rights in such
property.
52. Satellite Dish or Antenna. Tenant, at Tenant’s
sole cost and expense, shall have the right to install, operate, maintain, repair, replace and remove a
satellite dish or antenna (together
with all necessary related cables and equipment, the “Dish”) at the Premises subject to the following terms,
conditions and
limitations: (i) the location of the Dish shall be on the roof of the Premises or such other location at the Shopping Center as Landlord
shall reasonably direct (so long as such location provides for clear reception and transmission of signals) and Tenant agrees that in
the event Landlord
expands or reconfigures the Shopping Center so as to require the relocation of the Dish, Tenant agrees to relocate
same, at its sole cost and expense, to
a new location at the Shopping Center reasonably designated by Landlord (so long as such location
provides for clear reception and transmission of
signals); (ii) installation, operation, maintenance, repair, replacement and removal
of the Dish and related equipment, and any attendant costs and
expenses, including without limitation electric utility costs, shall be
the sole responsibility of Tenant; (iii) if any roof penetrations are required in
connection with the Dish, at Landlord’s option
such work shall be performed as follows: (a) by Landlord or its contractor, at Tenant’s sole cost, payable
upon demand as additional
rent, or (b) by Tenant’s contractor previously approved in writing by Landlord, subject to Landlord’s supervision and
inspection
of work; (iv) any roof penetrations shall not invalidate any warranty applicable to the roof and Tenant agrees to indemnify, defend and
hold
Landlord harmless against any and all reasonable costs and expenses incurred by Landlord in connection with such an invalidation;
(v) if required by
Landlord, Tenant shall screen the Dish by providing fencing, screening material or landscaping reasonably satisfactory
to Landlord; (vi) Tenant shall
obtain and maintain, at all times during the term of the Lease, any permit, license or approval required
by any governmental or regulatory body having
jurisdiction over the installation, operation, maintenance, repair, replacement or removal
of the Dish and upon Landlord’s request, shall deliver
evidence of same to Landlord; (vii) Tenant shall install, operate, maintain,
repair, replace and remove the Dish in strict compliance with all applicable
laws, ordinances, regulations, rules, orders and directives
of any governmental or regulatory body having jurisdiction over any such activity and the
terms and conditions of any permit, license
or approval concerning the Dish; (viii) Tenant’s installation or operation of the Dish shall not materially
interfere with the
operation of any other transmission or receiving device at or in the vicinity of the Shopping Center present at the time of installation.
In the event of such interference, upon notice from Landlord, Tenant shall cease using or operating the Dish and take all steps necessary
to eliminate
such interference before resuming its use or operation; (ix) the Dish shall be used and operated by and for Tenant and not
by or for the benefit of any
other person or entity, solely for purposes of carrying out and facilitating Tenant’s business operations
at the Premises as permitted and limited under
the Lease, and for no other purpose; (x) Tenant shall give Landlord reasonable prior notice
of the Tenant’s need to access the Dish for service, except in
the case of an emergency; (xi) Tenant shall repair to Landlord’s
satisfaction all damage to the Premises or any other part of the Shopping Center
(including but not limited to the building roof) resulting
from Tenant’s installation, operation, maintenance, repair, replacement and removal of the
Dish; (xii) Tenant agrees to indemnify, defend
and hold harmless Landlord from any costs, liabilities or damages arising from or caused by the
installation, use or existence of said
Roof Equipment; and (xiii) at the expiration or earlier termination of the Lease, Tenant shall remove the Dish and
repair any and all
damage caused by such removal.
31
GUARANTY
FOR VALUE RECEIVED and in
consideration of, and as an inducement for the execution and delivery of the within Lease of even date by and
between BRIXMOR HOLDINGS
12 SPE, LLC, a Delaware limited liability company and KAMADA PLASMA, LLC, a Delaware limited liability
company d/b/a Kamada
Plasma, for certain premises at the Northshore West in Houston, Texas, the undersigned, KAMADA, INC., a Delaware corporation
of
221 River St, 9th Floor, Hoboken, NJ 07030 (the “Guarantor”) hereby guarantees to Landlord, its heirs, executors,
administrators, successors and
assigns, the full and prompt payment of Rent, including, but not limited to, any and all other sums and
charges payable by Tenant or the then-holder of the
Tenant’s interest under the Lease including Tenant’s heirs, executors, administrators,
successors, assigns (subject to the terms of the Lease), or by operation
of law or other transfer (individually and collectively, the
“Tenant”), and hereby further guarantees the full and timely performance and observance of all
the covenants, terms,
conditions and agreements therein provided to be performed and observed by Tenant under the Lease; and Guarantor hereby
covenants and
agrees to and with Landlord that if a default shall at any time be made by Tenant, in the payment of the Rent and/or any other such sums
and
charges payable by Tenant under the Lease, or if Tenant should default in the performance and observance of any of the terms, covenants,
provisions or
conditions contained in the Lease, after the expiration of applicable notice and cure periods, Guarantor shall and will
forthwith pay such rent and other such
sums and charges to Landlord, and any arrears thereof, and shall, and will, forthwith pay to Landlord
all damages that may arise in consequence of any
default by Tenant under the Lease, including, without limitation, all reasonable attorneys’
fees and disbursements incurred by Landlord or caused by any
such default and/or by the enforcement of this Guaranty. The Lease is incorporated
herein by reference; and unless specifically defined herein, all
capitalized terms used in this Guaranty shall have the same meaning as
the capitalized terms in the Lease.
This Guaranty is an absolute
and unconditional irrevocable Guaranty of payment and of performance. It shall be enforceable against Guarantor,
without the necessity
for any suit or proceedings on Landlord’s part of any kind or nature whatsoever against Tenant, and without necessity of any notice of
nonpayment, nonperformance or nonobservance or of any notice of acceptance of this Guaranty or of any other notice or demand to which
Guarantor might
otherwise be entitled, all of which Guarantor hereby expressly waives and Guarantor hereby expressly agrees that the validity
of this Guaranty and the
obligations of the Guarantor hereunder shall not be terminated, affected, diminished or impaired by reason of
the assertion, or the failure to assert, by
Landlord against Tenant, of any of the rights or remedies reserved to Landlord pursuant to
the provisions of the Lease.
This Guaranty shall be a continuing
Guaranty and shall continue to apply through all amendments, modifications, renewals and/or extensions of
the Lease. The liability of
Guarantor hereunder shall in no way be affected, modified, or diminished by reason of an assignment (subject to the terms of the
Lease),
subletting, merger, or other transfer of the Lease, or by reason of any renewal, modification or extension of the Lease, or by reason
of any
modification or waiver of or change in any terms, covenants, conditions or provisions of the Lease between Landlord and Tenant,
or by reason of an
extension of time that may be granted by Landlord to Tenant, or by reason of any dealings or transactions between Landlord
and Tenant, whether or not
notice thereof is given to Guarantor. All of Landlord’s rights and remedies under the Lease or under this Guaranty
are intended to be distinct, separate and
cumulative, and no such right and remedy therein or herein mentioned is intended to be in exclusion
of or a waiver of any of the others. This Guaranty shall
be construed in accordance with the laws of the State of Texas.
Provided Tenant has performed
all of Tenant’s covenants and obligations under the Lease and Guarantor has performed all of Guarantor’s
covenants and obligations
under this Guaranty, then effective on the sixth anniversary of the Rent Commencement Date, Guarantor’s liability under this
Guaranty
shall be limited to: an amount equal to twelve months’ of Minimum Rent and Additional Rent based upon the prevailing rates at the
time of
demand; plus all interest and late fees on any past due amount owed to Landlord pursuant to the Lease; plus all collection costs
incurred by Landlord in
enforcing the Lease and/or this Guaranty, including without limitation attorneys’ fees and expenses.
This Guaranty may be executed
in multiple counterparts, each of which shall constitute one agreement, even though all parties do not sign the
same counterpart. The
signature pages taken from separate individually executed counterparts of this Guaranty may be combined to form multiple fully
executed
counterparts; and the delivery (i.e., the transmission by either party) of his, her or its signature on an original or any copy of this
Guaranty (1) in
electronic photostatic format (e.g., .pdf or .tiff file extension name) or similar format as an attachment to electronic
mail (“email”), or (2) via electronic
signature technology (e.g., DocuSign) shall be deemed to be the delivery by such party
of his, her or its original signature hereon (and shall be treated in all
respects as having the same effect as delivery of an original,
so-called “wet ink” signature). All executed counterparts of this Guaranty shall be deemed to
be originals, but all such counterparts,
taken together or collectively, as the case may be, shall constitute one and the same agreement.
GUARANTOR:
KAMADA, INC., a Delaware corporation
By:
Name:
Title:
Date:
32
Exhibit 8.1
SIGNIFICANT SUBSIDIARIES
Our significant subsidiaries
are set forth below, all of which are either 100% owned by us or controlled by us.
Legal Name
Jurisdiction
KI Biopharma LLC
Delaware
Kamada Inc.
Delaware
Kamada Plasma LLC
Delaware (wholly owned by Kamada Inc.)
Kamada Assets (2001) Ltd.
Israel
Kamada Ireland Limited
Ireland
Exhibit 11.1
KAMADA
LTD.
INSIDER
TRADING POLICY
Adopted by the Board of Directors in March
2025
This Insider Trading Policy (this “Policy”) provides
guidelines and restrictions to all personnel, including directors, officers, employees, including
those that are full-time, part-time
or employed through third parties, consultants and any other person who receives or has access to material non-public
information (“Company
Personnel”), of Kamada Ltd. and its subsidiaries (collectively, “Kamada” or the “Company”),
for transactions in the Company’s
securities and the handling of confidential and material non-public information about the Company
and others with which it does business.
All
Company Personnel should be aware of the provisions of this Policy. Failure to observe the prohibitions and procedures set forth
below
could result in serious civil and criminal liabilities, for you and possibly the Company under both United States and Israeli securities
laws.
The Securities and Exchange Commission (the “SEC”) has the authority to impose large fines on the Company
and on the Company’s directors, executive
officers and controlling stockholders if the Company’s employees engage in insider
trading and the Company has failed to take appropriate steps to prevent
it (so-called “controlling person” liability). Individuals
may face personal liability, including fines and potential imprisonment. In addition, failure to
comply with this Policy may subject
you to Company-imposed sanctions, including dismissal, regardless of whether or not such failure to comply
with this Policy results in
a violation of law.
POLICY
As
a public company, traded both in the United States and in Israel, Kamada is subject to certain provisions of United States federal securities
laws
and regulations, as well as Israeli securities laws and regulations. Pursuant to these laws and regulations, “insider trading”,
which is the use of material
information about the Company that is not known to the investing public, and, if it were known to the public,
would likely have a significant effect on the
market price of the Company’s securities or a person’s decision to buy, sell
or hold the Company’s securities (such information is referred to in this Policy
as “material non-public information,”
and is more fully explained in Guidelines, Item 3 below), including, for example, for personal benefit or for the
benefit of others
or to “tip” others who might make an investment decision on the basis of such information, is illegal. It is the policy of
the Company to
comply with all insider trading laws and regulations.
RESPONSIBILITY
Company
Personnel may create, use or have access to material non-public information. Each individual has an important ethical and legal
obligation
to maintain the confidentiality of such information and not to engage in any transactions in the Company’s securities while in
possession of
material non-public information. Company Personnel or Related Parties (as defined in Guidelines, Item 2 below) may,
from time to time, have to forego a
proposed transaction in the Company’s securities even if he or she planned to make the transaction
before the Company Personnel learned of the material
non-public information and even though he or she may suffer an economic loss or
forego anticipated profit by waiting. Trading in securities in violation of
applicable insider trading laws or this Policy by providing
others with material non-public information (whether or not you derive any benefit from such
actions or were aware of the intent by such
persons to trade), may subject you to severe civil and criminal penalties, in addition to disciplinary action by the
Company as more
fully set out in Guidelines, Item 16 below.
COMPLIANCE
OFFICER
The
Company’s Compliance Officer is its General Counsel. The Compliance Officer is responsible for the administration of this Policy. In
the
absence of the Compliance Officer, the Chief Financial Officer, or in his absence, an officer or director designated by the Compliance
Officer shall be
responsible for administration of this Policy. This Policy does not attempt to deal with all of the considerations that
may be applicable to certain securities
transactions. If you have any questions about specific information or proposed transactions,
or as to the applicability or interpretation of this Policy or the
propriety of any desired action, you are encouraged to contact the
Compliance Officer. Do not try to resolve uncertainties on your own. Remember,
however, the ultimate responsibility for complying with
this Policy and avoiding improper transactions rests with you. In this regard, it is imperative that
you use your best judgment. A claim
of lack of understanding of the Company’s policies or of governing legal standards in this sensitive area will not
excuse any non-compliance.
All
types of “securities” are covered by this policy, including ordinary shares, options, warrants and all forms of debt securities
(e.g., bonds, notes,
debentures), whether or not convertible or exchangeable, as well as instruments that derive their value from the
price of the Company’s securities (all
references to “Company securities” in this Policy include such derivative securities
of the Company).
GUIDELINES
1.
Prohibition.
In
general, United States and Israeli securities laws and/or this Policy prohibit Company Personnel from:
(a) buying,
selling or otherwise trading (including for the benefit of another) in the Company’s
securities (including derivative securities) while in
possession of material non-public (or
“inside”) information;
(b) communicating
(or “tipping”) such information to third parties, including family members, friends,
social acquaintances and anyone who
lives in your household;
(c) recommending
the purchase or sale of the Company’s securities (including derivative securities)
while in the possession of material non-
public information (under Israeli law, an actual
trade is not required);
(d) assisting
anyone engaged in any of the above activities; and
2
(e) answering
questions or providing information about the Company and its affairs to third parties unless
you are specifically authorized to do so
or it is a regular part of your position.
This
prohibition also applies to material, non-public information about, and the securities of, other companies (e.g., collaboration
partners,
customers or suppliers) with which the Company has a relationship.
There
are no exceptions to this Policy other than those described in Guidelines, Item 7 below. For example, if you possess material
non-public
information, you are prohibited to engage in transactions in the Company’s securities (including derivative securities)
even if such transactions are
otherwise necessary or justifiable for independent reasons (such as personal financial commitments or the
need to raise money for a personal emergency
expenditure).
2.
Transactions
by Family Members; Entities Controlled by You.
The
prohibitions outlined in this Policy also apply to your family members, others living in your household or who are financially dependent
on
you, and any entities (including but not limited to any corporation, limited liability company, partnership, trust or other entity)
under your or your family
member’s control (“Related Parties”). Company Personnel are expected to be responsible
for the compliance of all Related Parties to this Policy and
therefore, should make Related Parties aware of the need to confer with
this Policy before they trade in Company securities. This Policy does not, however,
apply to personal securities transactions of Related
Parties where the purchase or sale decision is made by a third party not controlled by, influenced by or
related to you or such Related
Parties (for avoidance about, excluding any Qualified Selling Plan, as defined in Guidelines, Item 10). This Policy applies to
all individuals and entities described above, even if the activities prohibited in this Policy are not illegal in the country where any
particular person or entity
is located.
3.
Material
Non-Public Information.
Material
Information. Information is “material” for the purposes of the United States securities laws and this Policy if such
information, if
publicly known, would likely affect either the market price of the Company’s securities, for better or for worse,
or a person’s decision to buy, sell or hold
the Company’s securities. Under Israeli law, “inside information”
includes information that is not known to the public and, if it were known to the public,
would cause a significant change in the price
of the Company’s securities (including derivative securities).
Non-public
Information. Non-public information is any information that has not been disclosed effectively to the investing public. The information
must be widely disseminated in a manner making it generally available to investors, such as by press release or in the Company’s
public disclosure
documents filed with the SEC and the Israel Securities Authority, is necessary to make the information public. For
information to be considered public, it
must not only be disclosed publicly, but there also should be sufficient time for the investing
public to absorb and evaluate the information before you trade
in the Company’s securities. Although timing may vary depending
upon the circumstances and jurisdiction, a good rule of thumb is that information is
considered non-public until the completion of the
second full trading day has passed after public disclosure. For example, if the Company issues an
earnings
release on a Friday before the opening of the market, the information contained in the release would be considered “public”
upon the opening of
the market the following Tuesday. If the information released is complex, such as a prospective major financing or
other transaction, it may be necessary to
allow additional time for the information to be absorbed by the investing public. In such circumstances,
you will be notified by the Compliance Officer
regarding a suitable waiting period before trading in the event it differs from the Company’s
standard policy.
3
Either
positive or negative information may be material. No simple “bright line” test exists to determine when information is material;
assessments
of materiality involve a highly fact-specific inquiry and will be more often than not determined in hindsight based by the
impact on the share price. For this
reason, you should direct any questions about whether information is material to the Compliance Officer.
Although it is not possible to list all types of
material information, the following are a few examples of information that is particularly
sensitive and should be treated as material:
●
the
status (positive or negative) of existing collaborations;
●
potential
new collaborations;
●
significant
clinical or regulatory developments;
●
significant
new products, product development or discoveries;
●
actual
or threatened material investigation or litigation or major development in or the resolution
of such investigation or litigation;
●
the
results or developments, favorable or not, of a clinical trial;
●
the
gain or loss of a material contract, customer, license or collaboration;
●
significant
cybersecurity incidents;
●
significant
changes, developments or delays in technological processes or manufacturing;
●
a
significant financing transaction (including public or private offerings or sales of debt
or equity securities) or significant borrowing;
●
financial
results, in particular quarterly or annual earnings results, or material changes to previously
filed financial statements;
●
projections
or estimations of future revenues, results or sales or material changes thereto;
●
earnings
or losses;
●
significant
transactions, such as a pending or proposed merger, acquisition, sale of a substantial portion
of the Company’s assets, joint venture,
tender offer or other significant transaction;
●
dividend
distributions or significant changes in dividend policies, stock splits or the offering of
additional securities;
4
●
significant
restructuring;
●
changes
in management or key personnel or control; and
●
impending
bankruptcy or financial liquidity problems.
In
addition, rumors or speculative information concerning the Company that, if true, would be material non-public information, are deemed
material non-public information for purposes of this Policy, and you should not trade on the basis of them.
The
Company emphasizes that this list is merely illustrative. If you have any question as to whether particular information is material or
non-
public, you should not trade or communicate the information to anyone without prior approval by the Compliance Officer. Remember,
however, the
ultimate responsibility for complying with this Policy and avoiding improper transactions rests with you.
4.
“Tipping.”
Company
Personnel may be liable for communicating or tipping material, non-public information to a third party (“tippee”). Furthermore,
tippees
inherit an insider’s duties and are liable for trading on material, non-public information illegally tipped to them by
an insider. Similarly, just as insiders are
liable for the insider trading of their tippees, so are tippees who pass the information
along to others who trade.
Accordingly,
Company Personnel are prohibited from recommending or suggesting to anyone else (including Related Parties, friends or
acquaintances) to buy, sell or hold the securities of any company, including those of the Company, while they are in the possession
of material non-public
information of the Company or other companies, as applicable. Tipping also includes making recommendations,
“signaling,” or expressing opinions about
trading, while aware of material non-public information. In fact, Company
Personnel should not recommend to any other person that they buy, sell or hold
securities of the Company, even when not in
possession of material non-public information, because such a recommendation could be imputed to the
Company and could be misleading
if such Company Personnel is not aware of all relevant information. Company Personnel are prohibited from using
material non-public
information for personal benefit, or to pass on, or “tip,” the information to someone who does so. Use of material
non-public
information to gain personal benefit and tipping are illegal irrespective of the amount of loss or gain. You can be held
liable both for your own transactions
and for transactions effected by the person acting on the tip (a “tippee”) or
even a tippee of a tippee. It is the Company’s policy to prohibit the disclosure of
non-public information to any person,
whether inside or outside the Company, unless the person receiving such information has a legitimate need to know
such information
and is subject to a confidentiality agreement.
5.
Short-term,
Speculative Transactions.
The
Company has determined that there is a substantial likelihood for the appearance of improper conduct by Company Personnel when they
engage
in short-term or speculative securities transactions. Therefore, Company Personnel are prohibited from engaging in any of the following
activities
involving the Company’s securities:
(a) purchasing
the Company’s securities on margin (borrowing money from a stock broker to fund the
securities purchase);
5
(b) pledging
Company securities;
(c) short
sales (selling short is a practice of selling more securities than you own, a technique used
to speculate on a decline in the securities
price);
(d) buying
or selling puts or calls (a put is a right to sell at a specified price a specified number
of securities by a certain date and is utilized in
anticipation of a decline in the security
price. A call is a right to buy at a specified price a specified number of securities by
a certain date and
is utilized in anticipation of a rise in the security price). The only
equity securities of the Company that may generally be purchased or sold by
Company Personnel
are the Company’s ordinary shares; and
(e) engaging
in derivative or hedging transactions relating to the Company’s securities (e.g., exchange
traded options etc.).
This
prohibition is not intended to apply to transactions that may involve one or more of the foregoing activities if those transactions are
entered
into solely for the purpose of deferring the effective date of a sale for tax or other non-speculative purposes. Please note,
however, that entering into any
such transaction must be done at a time when trading in the Company’s securities is permitted.
If due to the unique nature of the proposed transaction or its
complexity it is not clear whether there is a substantial likelihood for
the appearance of improper conduct, Company Personnel should seek the consent of
the Compliance Officer before entering into such transaction
in accordance with the pre-clearance provisions set forth in Guidelines, Item 14 below.
6.
Market
Manipulation and Influencing a Security’s Price.
It
is prohibited to engage in market manipulation and to fraudulently influence the price of securities (such as by placing fictitious purchase
or sale
orders to create an impression of large demand or supply thereby intending to cause an increase or decrease in the price of the
security). Pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the person committing
such a fraudulent act may be subject to fines and/or
imprisonment. In addition, the person committing the fraudulent act may also expose
him/herself to a civil action by the party who suffered damages as a
result of the fraudulent acts. Therefore, Company Personnel are
strictly prohibited from committing any acts or omissions which constitute or could
constitute such manipulation of the Company’s
securities and the Compliance Officer must be updated without delay in any event of a suspicion that such
an act was committed.
7.
Certain
Exceptions.
The
following transactions are exempt from the provisions set out in Guidelines, Item 1 and 8 of this Policy:
(a) The
vesting or exercise of options for the purchase of securities or other equity awards under
any Company equity incentive plan, including
the Company’s 2011 Israeli Share Award
Plan, as may be amended from time to time, the surrender of shares to the Company in payment
of
the exercise price or in satisfaction of any tax withholding obligations, are all exempt
from this Policy, because the other party to the
transaction is the Company itself and the
price does not vary with the market, but instead is fixed by the terms of the equity award
agreement
or the plan. However, the securities so acquired may not be sold except in accordance
with this Policy. For the avoidance of doubt, this Policy
applies to any market sale for
the purpose of generating the cash needed to pay the exercise price of an option or tax withholding
due upon
vesting of an option (e.g. cashless exercise). In addition, transactions in mutual
funds that are invested in securities of the Company are not
transactions subject to this
Policy.
6
(b) Purchases
of the Company’s securities from the Company or sales of the Company’s securities
to the Company.
(c) Purchases
or sales made pursuant to a Qualified Selling Plan, as defined in Guidelines, Item 10
below and in accordance therewith.
8.
Blackout
Periods.
Company
Personnel and Related Parties are restricted from trading in Company securities at certain times throughout the year as described below
(“Blackout Period/s”).
Company Personnel and Related Parties may not buy, sell or otherwise
trade (including for the benefit of another) in Company securities during
the period (i) beginning on 15th day before the end
of any fiscal quarter of the Company and ending upon completion of the second full trading day after
the public release of earnings data
for such fiscal quarter (or, in the case of the fourth quarter, year), (ii) beginning at the time of any public announcement
of a significant
corporate transaction or event and ending upon the completion of the second full trading day after such announcement, or (iii) during
any
other trading suspension period declared by the Company, which may be declared with respect to all or certain Company Personnel and
their Related
Parties. The day of publication shall be included as a “trading day” if the shares are traded on that day. For
purposes of this Policy, a “trading day” is a day
on which NASDAQ Stock Market is open for trading.
It
should be noted that even during permitted trading periods (“Trading Windows”), any Company Personnel or Related Party
possessing
material non-public information concerning the Company shall not engage in any transactions in the Company’s securities
until such information has been
known publicly for at least one full trading day. Furthermore, there are times when the management of
the Company may be aware of a material non-public
development but at its discretion does not disclose it to all Company Personnel. Although
you may not know the specifics of the development, if you
engage in a trade before such development is resolved or disclosed to the public
you might expose yourself and the Company to a charge of insider trading
that could be costly and difficult to refute. In addition, a
trade by you during such time could result in adverse publicity for the Company. Therefore, the
Company may from time to time prohibit
any transactions in Company securities for specified periods, even during Trading Windows. This notice may be
given to all Company Personnel
or to Company Personnel involved with specific matters. In the event you are informed of any such Blackout Period, you
should treat such
notification in itself as material non-public information and it should not be disclosed to any third party.
7
Each
person is individually responsible at all times for compliance with the prohibitions against insider trading. Trading in the Company’s
securities during Trading Windows should not be considered as “safe harbor,” and all Company Personnel should use good judgment
at all times.
Specific
exceptions may be made, with prior approval, in special situations when the Company Personnel does not possess material non-public
information
or the exception would not otherwise contravene the law or the purposes of this Policy. Any request for an exception must be directed
to the
Compliance Officer.
The
Compliance Officer shall issue a notice to Company Personnel: (i) at the beginning of each Blackout Period, informing of its applicability;
and (ii) upon the removal of the Blackout Period once the Blackout Period ends.
9.
Post–Termination
Transactions.
The
restrictions set forth in this Policy apply to Company Personnel and Related Parties following the termination of such Company Personnel’s
employment, engagement or term of office, as applicable, for the longer of the following: (1) if Company Personnel is aware of material
non-public
information when his or her employment, engagement or term of office terminates, until such information ceases to be material
or until the close of
business on the second trading day following the date on which such information is publicly disclosed, (2) if the
termination of employment, engagement
or term of office occurs during a Blackout Period, until the expiration of the Blackout Period
and (3) for such period as the Company shall determine such
person is likely to be in possession of material non-public information,
such determination shall be made by at least two of the following individuals
(excluding the applicable Company Personnel): the Company’s
Chairman of the Board of Directors, Chairman of the Audit Committee, Chief Executive
Officer, Chief Financial Officer or General Counsel.
In
the event of departure due to Company Personnel’s death, his/her Related Parties shall no longer be considered subject to this
Policy; however,
the prohibition on trading in the Company’s securities when in possession of material non-public information shall
continue to apply.
10.
Trading
Plans.
The
restrictions set forth above will not apply to transactions in the Company’s securities made pursuant to a Qualified Selling Plan.
For purposes
of this exception, a “Qualified Selling Plan” is a written plan, contract or instruction for purchasing
or selling the Company’s shares which meets each of
the following requirements:
(a) the
plan is adopted by Company Personnel during a period when transactions in the Company’s
securities are permitted pursuant to this Policy
and not in a Blackout Period;
(b) the
plan is adopted during a period when Company Personnel adopting the plan is not in possession
of material non-public information;
(c) the
plan is reviewed and approved by the Compliance Officer prior to establishment or modification
(to the extent permitted under applicable
law) to confirm compliance with this Policy and
the United States and Israeli securities laws;
8
(d) the
plan is adhered to strictly by Company Personnel;
(e) the
plan must either (i) specify the amount, pricing and timing of transactions in advance; (ii)
include a written formula or algorithm, or
computer program for determining the amount, price
and date of the transactions; or (iii) if permitted under applicable law, delegate discretion
on these matters to an independent third party (in which case the plan must prohibit the
Company Personnel from exercising any subsequent
influence over the transactions in the Company’
securities under the plan);
(f)
no
purchases or sales may occur under the plan following its adoption until the expiration of
any cooling-off period required under applicable
law;
(g) the
plan allows for the cancellation of a transaction and/or suspension of such plan upon notice
and request by the Company to the plan’s
administrator if any proposed trade (i) fails
to comply with applicable laws or (ii) would create material adverse consequences for the
Company;
(h) at
the time it is adopted, the plan conforms to all other requirements of (i) Rule 10b5-1(c)
under the Exchange Act, or (ii) for securities that
are traded only on the Tel Aviv Stock
Exchange Ltd. (“TASE”), the Israel Securities Authority’s SLB 101-18
(safe harbor with respect to the
use of inside information in transactions in securities
of a corporation by key officers, employees and major shareholders), in each case as
may
be amended from time to time; and
(i)
the
plan provides that the transactions be effected on Nasdaq or the TASE (as the case may be).
Once
the plan is adopted, (i) Company Personnel may not exercise any influence over the amount of securities to be traded, the price at which
they
are to be traded or the date(s) of the trade(s) and (ii) the plan may not be terminated or altered unless permitted under applicable
law, and in such case only
during a period that complies with the description in both subsections (a) and (b) above, and upon such termination
or alteration, Company Personnel is to
notify the Company of such termination or alteration.
None
of the Company, the Compliance Officer or the Company’s other employees will have any liability for any delay in reviewing, or
refusal of, a
plan submitted pursuant to this Policy. Notwithstanding any review of a plan pursuant to this Policy, none of the Company,
the Compliance Officer or the
Company’s other employees assumes any liability for the legality or consequences relating to such
plan to the person adopting such plan.
The
Company may make a public announcement or disclose that plans are being implemented and will consider in each case whether a public
announcement
or disclosure of a particular plan should be made in accordance with applicable law.
9
11.
Confidentiality
Guidelines.
To
provide more effective protection against the inadvertent disclosure of material non-public information about the Company or others with
which the Company does business, the Company has adopted the following guidelines in addition to the prohibitions above. These guidelines
are not
intended to be exhaustive and should be read together with the Company’s Disclosure Policy. Additional measures to secure
the confidentiality of
information should be undertaken as deemed necessary under the circumstances. If you have any doubt as to your
responsibilities with respect to
confidential information, please seek clarification and guidance from the Compliance Officer before
you act.
The
following guidelines establish procedures with which Company Personnel should comply in order to maximize the security of confidential
information:
(a) do
not discuss internal Company matters or developments with anyone outside the Company or even
with other Company Personnel, except
as required in the performance of your regular duties
and provided the recipient is subject to a confidentiality agreement;
(b) do
not discuss any Company matter in public places, such as airplanes, elevators, taxicabs,
hallways, restrooms, restaurants, etc., where
conversations might be overheard;
(c) do
not discuss any Company matter in a place where family members, friends or acquaintances
may overhear;
(d) do
not leave confidential documents and other materials in conference rooms following the conclusion
of any meetings and do not leave
documents disclosing Company matters in areas (e.g., on
counters in hallways) where they may be read by a passerby;
(e) do
not participate in “chat rooms” or other electronic discussion groups on the
Internet or through social media applications concerning the
activities of the Company or
of other companies with which the Company does business, even if you do so anonymously;
(f)
use
passwords to restrict access to the information on computers, tablets, memory sticks; and
(g) limit
access of others to particular locations or physical areas where material non-public information
is likely to be documented or discussed.
12.
Prohibition
on Disclosure to Analysts and Media.
If
any Company Personnel receives inquiries about the Company from securities analysts, reporters or others, he or she should decline comment
and direct them to the Company’s Chief Executive Officer or Chief Financial Officer.
10
13.
Presumption
of Insider Trading Under Israeli Law.
Under
Israeli law, if a director or other office holder, controller or internal auditor of the Company (or any other person fulfilling
such position
even if his/her title is different), or a family member or entity controlled by any of the them, purchases securities
of the Company (including derivative
securities of the Company) within three months of the date that he or she sold securities of
the Company (or sells securities of the Company within three
months of the date that he or she purchased securities of the Company),
it would be presumed that such person used inside information, and such person
would have the burden to prove that he or she did not
use inside information unless under the circumstances it is reasonable that her or she did not possess
inside information at the
relevant time. Therefore, although this Policy does not prohibit purchases and sales by such individuals within a three-month
period, this Policy strongly discourages such practice.
14.
Pre-clearance
Procedures.
While the onus of complying with all insider trading and filing requirements
remains with the individual, to provide assistance in preventing
inadvertent violations and avoiding even the appearance of an improper
transaction, the following procedure is being implemented for all Company
Personnel.
(a) Subject
to the exemption in subsection (c) below, no Company Personnel or Related Party may, directly or indirectly, purchase or sell (or
otherwise
make any transfer, gift, pledge or loan of) any Company securities at any time without first obtaining prior approval from the
Compliance
Officer or the Company’s Compliance Manager (each, the “Pre-Clearance Officer”). The Chief Executive Officer
or the Chief
Financial Officer shall have the authority to decide whether to clear transactions by the Pre-Clearance Officer or its Related
Parties.
(b) The Pre-Clearance Officer shall record the
date each request is received and the date and time each request is approved or disapproved. If the
Pre-Clearance Officer has
approved the request, such approval shall be certified in writing (including by email). Unless revoked, a grant of
permission will
remain valid until the close of five trading days following the day on which it was granted. If the transaction does not occur
during the five-trading day period, pre-clearance of the transaction must be re-requested. Even if a trade has received
pre-clearance, such
Company Personnel or Related Party may not engage in a trade if (i) such pre-clearance has been rescinded by the
Pre-Clearance Officer; (ii)
such Company Personnel or Related Party has otherwise received notice that the trading window has
closed; or (iii) such Company Personnel
or Related Party has or acquires material non-public information concerning the
Company.
(c) Pre-clearance is not required for purchases
and sales of securities under a Qualified Selling Plan, provided that the plan was adopted in
accordance with this Policy. With
respect to any purchase or sale under a Qualified Selling Plan, the third-party effecting transactions on
behalf of the Company
Personnel or Related Party should be instructed to send duplicate confirmations of all such transactions to the Pre-
Clearance
Officer.
11
The Pre-Clearance Officer does not assume responsibility for, and approval
from the Pre-Clearance Officer does not protect the Company Personnel or
Related Party from, the consequences of prohibited insider trading.
15.
Reporting
Violations.
If
you know or have reason to believe that this Policy or the special trading procedures described above have been or are about to be violated,
you
should immediately bring the actual or potential violation to the attention of the Compliance Officer. Such information may be conveyed
on an anonymous
basis pursuant to the Company’s Whistleblower Policy, but sufficient details should be given to enable a proper
investigation.
16.
Penalties
for Violations.
Under
United States law, an individual may be subject to criminal fines and/or imprisonment for violating the securities laws by engaging in
transactions in securities at a time when they are in possession of material non-public information. In addition, the SEC may seek the
imposition of a civil
penalty based on the profits made or losses avoided from the trading. Insider traders must also disgorge any profits
made and are often subjected to an
injunction against future violations. Violators can also be barred from serving as officers or directors
of public companies. Under some circumstances,
individuals may be subjected to civil liability in private lawsuits. In addition, under
Israeli law, individuals may be subject to a criminal fine or
imprisonment, or administrative sanctions. Violators may also be barred
from serving as officers or directors of public companies for up to five years.
Failure
to comply with this Policy could result in serious civil and criminal liabilities, for you and possibly the Company under both United
States
and Israeli securities laws. The Company may be subject to so-called “controlling person” liability. In addition,
failure to comply with this Policy, or any
refusal or failure by you to cooperate fully with the Company in any investigation of a possible
violation of this Policy, will be regarded by the Company as
a very serious matter and, may subject you to Company-imposed sanctions,
including dismissal, regardless of whether or not such failure to comply with
this Policy results in a violation of law. It is important
to note that regardless of a violation of law, an investigation into potential insider trading by United
States and/or Israeli enforcement
authorities that does not result in prosecution, can tarnish a person’s and a Company’s reputation, thereby causing
irreparable
damage.
This
document states a policy of the Company and is not intended to be regarded as the rendering of legal advice. Company Personnel
who have
questions about the matters contained herein should speak with his or her own attorney or the Compliance Officer.
12
Exhibit 12.1
I, Amir London, certify that:
1.
I have reviewed this annual
report on Form 20-F of Kamada Ltd.;
2.
Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the
financial statements, and other financial information included in this report, fairly present in all material respects the
financial
condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the company
and have:
(a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information
relating to the company, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any
change in the company’s internal control over financial reporting that occurred during the period covered by the
annual report
that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting;
and
5.
The company’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
company’s
auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely
affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material,
that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: March 5, 2025
/s/ Amir London
Amir London
Chief Executive Officer
Exhibit 12.2
I, Chaime Orlev, certify that:
1.
I have reviewed this annual
report on Form 20-F of Kamada Ltd.;
2.
Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3.
Based on my knowledge, the
financial statements, and other financial information included in this report, fairly present in all material respects the
financial
condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the company
and have:
(a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information
relating to the company, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during
the period in which this report is being prepared;
(b) Designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance
with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any
change in the company’s internal control over financial reporting that occurred during the period covered by the
annual report
that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting;
and
5.
The company’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
company’s
auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely
affect the company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material,
that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: March 5, 2025
/s/ Chaime Orlev
Chaime Orlev
Chief Financial Officer
Exhibit 13.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual
Report of Kamada Ltd. (the “Company”) on Form 20-F for the period ended December 31, 2024 as filed with the
Securities and
Exchange Commission (the “Report”), I, Amir London, Chief Executive Officer of the Company, hereby certify pursuant to 18
U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with
the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) the information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: March 5, 2025
/s/ Amir London
Amir London
Chief Executive Officer
In connection with the Annual
Report of Kamada Ltd. (the “Company”) on Form 20-F for the period ended December 31, 2024 as filed with the
Securities and
Exchange Commission (the “Report”), I, Chaime Orlev, Chief Financial Officer of the Company, hereby certify pursuant to 18
U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with
the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2) the information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: March 5, 2025
/s/ Chaime Orlev
Chaime Orlev
Chief Financial Officer
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent to the incorporation
by reference in the Registration Statements on Form F-3 (File No. 333-274443) and Form S-8 (File Nos 333-
192720, 333-207933, 333-215983,
333-222891, 333-233267 and 333-265866) of Kamada Ltd. (the “Company”) of our reports dated March 5, 2025, with
respect to
the Company’s consolidated financial statements and the effectiveness of internal control over financial reporting of the Company
included in
this Annual Report on Form 20-F for the year ended December 31, 2024.
/s/ KOST FORER GABBAY &
KASIERER
KOST FORER GABBAY & KASIERER
A member of EY Global
Tel Aviv, Israel
March 5, 2025
Exhibit 97.1
KAMADA LTD.
COMPENSATION RECOUPMENT POLICY
Effective Date: December 1, 2023
In the event of any required accounting restatement
of the financial statements of Kamada Ltd. (the “Company”) due to the material noncompliance of the
Company with any financial
reporting requirement under the applicable U.S. federal securities laws or applicable Israeli laws, including any required
accounting
restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements,
or that
would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period
(a “Restatement”), the
Board of Directors of the Company (or any committee to which the Board of Directors may delegate its
authority) (the “Board”) shall recover reasonably
promptly from any person, who is or was an executive officer, as such term
is defined in Rule 10D-1 adopted under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), of the Company
(each, a “Covered Person”) the amount of any “Erroneously Awarded Incentive-Based Compensation” (as
defined below).
The amount of incentive-based compensation that
must be recovered from a Covered Person pursuant to the immediately preceding paragraph in the event
that the Company is required to prepare
a Restatement is the amount of incentive-based compensation received by a Covered Person that exceeds the
amount of incentive-based compensation
that otherwise would have been received had it been determined based on the restated amounts and must be
computed without regard to any
taxes paid (referred to as the “Erroneously Awarded Incentive-Based Compensation”). For incentive-based compensation
based
on stock price or total shareholder return, where the amount is not subject to mathematical recalculation directly from the information
in a
Restatement, the amount must be based on a reasonable estimate of the effect of the Restatement on the stock price or total shareholder
return, as
applicable, upon which the incentive-based compensation was received, and the Company must maintain documentation of that reasonable
estimate and
provide such documentation to the Nasdaq Stock Market LLC (“Nasdaq”). For the purposes of this policy, incentive-based
compensation will be deemed to
be received in the fiscal period during which the financial reporting measure specified in the applicable
incentive-based compensation award is attained,
even if the payment or grant occurs after the end of that period.
In determining the amount of Erroneously Awarded
Incentive-Based Compensation to be recovered from a Covered Person, this policy shall apply to all
incentive-based compensation received
by a Covered Person: (i) after beginning service as an executive officer; (ii) who served as an executive officer at
any time during the
performance period for the incentive-based compensation; (iii) while the Company has a class of securities listed on a national
securities
exchange or a national securities association; and (iv) during the three completed fiscal years immediately preceding the date that the
Company is
required to prepare a Restatement, including any applicable transition period that results from a change in the Company’s
fiscal year within or immediately
following those three completed fiscal years. For this purpose, the
Company is deemed to be required to prepare a Restatement on the earlier of: (i) the date
the Board, or the Company’s officers authorized
to take such action if Board action is not required, concludes, or reasonably should have concluded, that
the Company is required to prepare
a Restatement; or (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare a
Restatement. The
Company’s obligation to recover Erroneously Awarded Incentive-Based Compensation is not dependent on if or when the restated
financial
statements are filed with the Securities and Exchange Commission.
The Company shall recover the Erroneously
Awarded Incentive-Based Compensation from Covered Persons unless the Board determines that recovery is
impracticable because: (i)
the direct expense to a third party to assist in enforcing this policy would exceed the amount of Erroneously Awarded
Incentive-
Based Compensation; provided that the Company must make a reasonable attempt to recover the Erroneously Awarded
Incentive-Based Compensation
before concluding that recovery is impracticable, document such reasonable attempt to recover the
Erroneously Awarded Incentive-Based Compensation
and provide such documentation to Nasdaq; or (ii) recovery would likely cause an
otherwise tax-qualified retirement plan, under which benefits are broadly
available to employees of the Company, to fail to meet the
applicable requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder
or any applicable Israeli law.
For purposes of this policy, “incentive-based
compensation” refers to any compensation that is granted, earned, or vested based wholly or in part upon the
attainment of a “financial
reporting measure,” which refers to measures that are determined and presented in accordance with International Financial
Reporting
Standards (“IFRS”) as issued by the International Accounting Standard Board, which are used in preparing the Company’s
financial statements,
and any measures that are derived wholly or in part from such measures. Stock price and total shareholder return
are also financial reporting measures for
this purpose. For avoidance of doubt, a financial reporting measure need not be presented within
the Company’s financial statements or included in a filing
with the Securities and Exchange Commission.
In no event will the Company indemnify any Covered
Person for any amounts that are recovered under this policy. This policy is in addition to (and not in
lieu of) any right of repayment,
forfeiture or right of offset against any employees that is required pursuant to any statutory repayment requirement
(regardless of whether
implemented at any time prior to or following the adoption or amendment of this policy), including Section 304 of the Sarbanes-
Oxley Act
of 2002. Any amounts paid to the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 shall be considered in determining
any
amounts recovered under this policy.
The application and enforcement of this policy
does not preclude the Company from taking any other action to enforce a Covered Person’s obligations to
the Company, including termination
of employment or institution of legal proceedings. The terms of this policy shall be binding and enforceable against all
persons subject
to this policy and their beneficiaries, heirs, executors, administrators or other legal representatives.
This policy does not impede any rules applicable
to the Company under applicable law, including (without limitation) Israeli law, and is in addition to, and
not in lieu of, and shall
not derogate from, any other rights or obligations of the Company under applicable law, regulation or rule or any similar policy.
This
policy shall be interpreted in a manner that is consistent with Rule 10D-1 under the Exchange Act, Rule 5608 of the Nasdaq listing rules
and any
related rules or regulations adopted by the Securities and Exchange Commission or Nasdaq (the “Applicable Rules”)
as well as any other applicable law. To
the extent applicable law, regulation or rule (including, without limitation, Israeli law or the
Applicable Rules) require recovery of incentive-based
compensation in additional circumstances besides those specified above, nothing
in this policy shall be deemed to limit or restrict the right or obligation of
the Company to recover incentive-based compensation to
the fullest extent required by applicable law, regulation or rule (including, without limitation,
Israeli law or the Applicable Rules)
or in any compensation policy, employment agreement, equity plan, equity award agreement or similar arrangement.